Question: What is decision theory? What is the difference between a payoff table and an expected payoff table? In the following payoff table, let P(S1) = 0.30, P(S2) = 0.50, and P(S3) = 0.20. Compute the expected monetary value for each of the alternatives. What decision would you recommend?
| |
State of Nature |
| Alternative |
S1 |
S2 |
S3 |
| A1 |
$50 |
$70 |
$100 |
| A2 |
90 |
40 |
80 |
| A3 |
70 |
60 |
90 |