The following payoff matrix shows the profit outcomes for three projects, A, B, and C, for each of two possible product prices. There is a 60% probability the price will be $10 and a 40% probability the price will be $20.
|
Profit
|
|
Project
|
P = $10
|
P = $20
|
|
A
|
20
|
80
|
|
B
|
40
|
60
|
|
C
|
-26
|
140
|
Using the maximum expected value rule a decision maker would choose
a. A.
b. B.
c. C.
d. impossible to tell from the information
Using coefficient of variation rule a decision maker would choose
a. A.
b. B.
c. C.
d. can't use this rule under these circumstances