A concessions manager at the Tech versus A&M football game must decide whether to have the vendors sell sum visors or umbrellas. There is a 30% chance of rain, a 15% chance of overcast skies, and a 55% chance of sunshine, according to the weather forecast in College Junction, where the game is to be held. The manager estimated that the following profits will result from each decision, given each set of weather conditions:
Decision Rain Overcast Sunshine
.30 .15 .55
Sun visors $-500 $-200 $1,500
Umbrellas 2,000 0 -900
a. Compute the expected value for each decision and select the best one.
b. Develop the opportunity loss table and compute the expected opportunity loss for each decision.