Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature $1, S2, and S3. SI $2 $3 Alternative

Consider the following payoff table that represents the profits
earned for each alternative (A, B, and C) under the states of
nature $1, S2, and S3.
SI
$2
$3
Alternative A
$60
$145
$120
Alternative B
$75
$125
$110
Alternative C
$95
$85
$130
a) Using each of the below criterion what would be the
alternative selected and highest expected payoff in $ value?
1) Optimistic Approach
2) Pessimistic Approach
3) Realism (Hurwicz criterion) with an alpha value of 0.7
4) Laplace
5) Minmax regret Approach
b) Suppose the likelihood of occurrence of the three state of
natures are: S1 = 0.2; $2 = 0.3; & S3 = 0.5.
1) is the EMV of each alternative and which one to
select?
2) is the EVwPI and EVPI?
3) Construct the EOL table.
4) is the EOL for each alternative and which one to
select?
5) Verify that the minimum EOL is equal to EVPI
c) Suppose the payoff matrix is in fact a cost matrix. Redo
parts (a) & (b) above.

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