Problem: The probabilities for the states of nature A, B, and C are 0.3, 0.5, and 0.2, respectively. If a person were to use the expected opportunity loss criterion, what decision would be made?
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STATE OF NATURE
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ALTERNATIVES
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A
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B
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C
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Alterative 1
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20
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100
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0
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|
Alterative 2
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100
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0
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25
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|
Alterative 3
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0
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40
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90
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A. Alternative 1
B. Alternative 2
C. Alternative 3
D. State of Nature C
E. State of Nature B