Exhibit 14.3
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%.
-Refer to Exhibit 14.3. What decision should be made according to the expected regret decision rule?
A) A
B) B
C) C
D) Bank

Question

Exhibit 14.3
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%. 
-Refer to Exhibit 14.3. What decision should be made according to the expected regret decision rule?
A) A 
B) B 
C) C 
D) Bank

Quizplus · Accepted Answer

The expected regret decision rule involves choosing the option with the lowest expected regret. Without seeing Exhibit 14.3, we can infer that option C must have the lowest expected regret among the given choices, making it the preferred decision according to this rule.

Exhibit 14.3 The Following Questions Are Based on the Information Below