A payoff matrix shows the profit that would be earned under certainty, risk, and uncertainty so the decision maker can choose which is best.

Question

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A payoff matrix shows the outcomes (such as profit, loss, or other metrics) for different decisions under various states of nature or scenarios, but it does not inherently categorize outcomes under certainty, risk, and uncertainty. It is a tool for decision-making under uncertainty by presenting possible outcomes for different actions.

A Payoff Matrix Shows the Profit That Would Be Earned