A.) A payoff table is a matrix whose rows correspond to decisions and whose colu

Question

A.) A payoff table is a matrix whose rows correspond to decisions and whose columns correspond to events. True (T) or False (F) ?

B.) The Minimize objective can use: an Aggressive Strategy (minimin strategy) or Conservative Strategy (minimax strategy) or an Opportunity Loss Strategy (minimax regret).

True (T) or False (F) ?

C.) The Maximize objective can use: an Aggressive Strategy (maximax strategy) or Conservative Strategy (maximin strategy) or an Opportunity Loss Strategy (minimax regret).

True (T) or False (F) ?

D.) If we can assess a probability for each outcome, we can choose the best decision based on the expected value. True (T) or False (F) ?

E.) Making good decisions requires an assessment of intangible factors and risk attitudes.

       True (T) or False (F) ?

Explanation / Answer

A.) A payoff table is a matrix whose rows correspond to decisions and whose columns correspond to events. True (T)

Rows of a payoff table (called also decision matrix) relate to the alternatives, columns relate to the states of nature. Elements of a decision matrix represent the payoffs for each alternative under each possible event

B.) The Minimize objective can use: an Aggressive Strategy (minimin strategy) or Conservative Strategy (minimax strategy) or an Opportunity Loss Strategy (minimax regret).

True (T)

C.) The Maximize objective can use: an Aggressive Strategy (maximax strategy) or Conservative Strategy (maximin strategy) or an Opportunity Loss Strategy (minimax regret).

True (T)

Maximize Objective (e.g. payoffs are profits)

Choose the decision that maximizes the largest payoff that can occur among all outcomes for each decision (maximax strategy).

Choose the decision that maximizes the smallest payoff that can occur among all outcomes for each decision (maximin strategy).

Choose the decision that minimizes the maximum opportunity loss among all outcomes for each decision (minimax regret).

Note that this is the same as for a minimize objective; however, calculation of the opportunity losses is different.

D.) If we can assess a probability for each outcome, we can choose the best decision based on the expected value. True (T)

In many situations, we might have some assessment of these probabilities, either through some method of forecasting or reliance on expert opinions.

If we can assess a probability for each outcome, we can choose the best decision based on the expected value.

The simplest case is to assume that each outcome is equally likely to occur; that is, the probability of each outcome is 1/N, where N is the number of possible outcomes. This is called the average payoff strategy.

E.) Making good decisions requires an assessment of intangible factors and risk attitudes.

       True (T)

The purpose of business analytic models is to provide decision-makers with information needed to make decisions.

Making good decisions requires an assessment of intangible factors and risk attitudes.

Decision making is the study of how people make decisions, particularly when faced with imperfect or uncertain information, as well as a collection of techniques to support decision choices.

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