The following payoff table shows the profit for a decision problem with three states of nature and three decision alternatives:
a. Suppose P(s1) = 0.1, P(S2) = 0.3, and P(S3) = 0.6. What is the best decision using the expected value approach?
b. Suppose that the probability of sate of nature, s1, s2, and s3 changes to 0.4, 0.2, and 0.4, respectively. What is the best decision using the expected value approach in this case?

Question

The following payoff table shows the profit for a decision problem with three states of nature and three decision alternatives:
  a. Suppose P(s1) = 0.1, P(S2) = 0.3, and P(S3) = 0.6. What is the best decision using the expected value approach?
b. Suppose that the probability of sate of nature, s1, s2, and s3 changes to 0.4, 0.2, and 0.4, respectively. What is the best decision using the expected value approach in this case?

Quizplus · Accepted Answer

The Answer of The following payoff table shows the profit for a decision problem with three states of nature and three decision alternatives:
  a. Suppose P(s1) = 0.1, P(S2) = 0.3, and P(S3) = 0.6. What is the best decision using the expected value approach?
b. Suppose that the probability of sate of nature, s1, s2, and s3 changes to 0.4, 0.2, and 0.4, respectively. What is the best decision using the expected value approach in this case?

The Following Payoff Table Shows the Profit for a Decision