P2 (25 Points) Aosttable is given as tate of Natur Decisiorn 51 750 250 500 500)

Question

P2 (25 Points) Aosttable is given as tate of Natur Decisiorn 51 750 250 500 500) 1200 200 300 500 a) (4 pts) What choice should be made by the optimistic decision maker? b) (4 pts) what choice should be made by the conservative decision maker? c (5 pts) What decision should be made under minimax egret? pts) If the probabilities of si. s., andsare 0.2,05, and 0.3,respectively, then what choice should be made under expected value? Q2 ; fe(4 pts)Using probabilities from part d, what choice should be made under E(Regret) or E(Opportunity Loss)? Note Decision/choice under condition of risk aversion. f) ) (4 pts) what :s the EVPl? ... .. . . c-...

Explanation / Answer

(d) Here if P(s1) = 0.2 , P(s2) = 0.5 and P(s3) = 0.3

THen for decisions:

for E(d1) = 0.2 * 200 + 0.5 * 750 + 0.3 * 500 = 565

E(d2) = 0.2 * 300 + 0.5 * 250 + 0.3 * 1200 = 545

E(d3) = 0.2 * 500 + 0.5 * 500 + 0.3 * 600 = 530

so we will take decision three here as it is associated with minimum cost here

(e) Now we have to made a regret table

E(regret for d1) = 0 * 0.2 + 500 * 0.5 + 0.3 * 0 = 250

E(regret for d2) = 100 * 0.2 + 0 * 0.5 + 700 * 0.3 = 230

E(regret for d3) = 300 * 0.2 + 250 * 0.5 + 100 * 0.3 = 215

so minimum regret is for d3 so we will choose d3 here

(f) Here EVPI will be calculated by mimimum cost option which is

Minimum cost = 200 * 0.2 + 250 * 0.5 + 500 * 0.3 = 315

Here EVPI = E(d1) - 315 = 530 - 315 = 215

Regret Table State of nature Decision s1 s2 s3 d1 0 500 0 d2 100 0 700 d3 300 250 100

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.