Reference no: EM13589668

1) You are given the following payoff tyable (in units of thouands of dollars) for a decision analysis problem without probabilities.

STATE OF NATURE

ALTERNATIVE                    S1           S2           S3

A1                                           6              4              3

A2                                           3              4              4

A3                                           8              1              5

A. Which alternative should be chosen under maximax criterion.

B. Which alternative should be chosen under the maximin criterion?

2) Barbara Miller makes decisions according to Bayes decision rule. For her current problem, Barbara has constructed the following payoff table (in units of hundreds of dollars) and she now wishes to maximixze the expected payoff.

STATE OF NATURE

ALTERNATIVE               S1           S2           S3

A1                               2X           50           10

A2                               25           40           90

A3                                35           3X           30          

Prior probability           0.4          0.2          0.4

The value of x currently is 50, but there is an opportunity to increase x by spending some money now. What is the maximum amount Barbara should spend to increase x to 75?