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What should decision of the manager based on expected values

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A firm is facing three different state of nature (high, moderate and low competition). The probability distribution and the returns under the different state of nature for the two decision alternatives (increasing price or reducing price) are known and given below:

State of nature          Probability (Pi)        Profit

Price increase

High competition            0.20                    1450

Moderate competition      0.40                  1400

Low competition             0.40                1350

Price decrease

High competition             0.20                1500

Moderate competition       0.40               1340

Low competition             0.40                  1300

Problem 1: What should be the decision of the manager (Increasing price or reducing price) based on expected values?

Reference no: EM132632681

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