SCENARIO 20-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

-Referring to Scenario 20-1,if the probability of S1 is 0.5,what is the optimal alternative using EMV?
A)A1
B)A2
C)A3
D)It cannot be determined.

Question

SCENARIO 20-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

-Referring to Scenario 20-1,if the probability of S1 is 0.5,what is the optimal alternative using EMV?
A)A1 
B)A2 
C)A3 
D)It cannot be determined.

Quizplus · Accepted Answer

EMV(A1) = 0.5(100) + 0.5(-100) = 0EMV(A2) = 0.5(200) + 0.5(0) = 100EMV(A3) = 0.5(300) + 0.5(-200) = 50Therefore, A2 is the optimal alternative with the highest EMV of 100.

SCENARIO 20-1 The Following Payoff Table Shows Profits Associated with a Set