Assignment:
QUESTION: A decision maker faced with four decision alternatives and four states of nature develops the following profit payoff table.
|
|
State of Nature
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Decision Alternative
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s1
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s2
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s3
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s4
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|
d1
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14
|
9
|
10
|
5
|
|
d2
|
11
|
10
|
8
|
7
|
|
d3
|
9
|
10
|
10
|
11
|
|
d4
|
8
|
10
|
11
|
13
|
(a) Define and use the average payoff strategy to choose the best decision.
(b) Define and use the aggressive strategy to choose the best decision.
(c) Define and use the conservative strategy to choose the best decision.
(d) Define and use the opportunity loss strategy to make the best decision.
(e) Suppose the decision maker obtains information that enables the following probability assessments: P(s_1) = 0.5; P(s_2) = 0.2; P(s_3) = 0.2; and P(s_4) = 0.1. Define and use the expected value approach to determine the optimal strategy.