1. Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) withthe following payoff table:Decision s1 s2 s3d1d2150 200 20050200500The probabilities of s1, s2, and s3 are unknown. Using the optimistic approach, what is the optimal decision and what isthe value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to arrive at thisdecision in the second.Question 6 options:2. Suppose a company can select among two decisions (d1 and d2) and face threestates of nature (s1, s2 and s3) with the following payoff table:Decision s1 s2 s3d1d2150 200 20050 200 500The probabilities of s1, s2, and s3 are unknown. Using the conservative approach, what is the optimal decision and what isthe value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to derive thissolution in the second.Question 7 options:83. Suppose a company must consider two decisions (d1 and d2) under two states of nature (s1 and s2). Suppose theexpected value functions for d1 and d2 are given as:EV(d1) p(8) + (1-p)(6)EV(d2) p(15) + (1-p)(3)where p = P(s1) and 1-p = P(s2). In conducting sensitivity analysis, which of the following is correct?Question 8 options:d2 is the optimal decision as long as p > 0.30d2 is the optimal decision as long as p > 0.05d1 is the optimal decision as long as p > 0.30d2 is never the optimal decision

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1. Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) with the following payoff table: ecision s1 s2 s3 150 50 d1 200 200 d2 200 500 he probabilities of s1, s2, and s3 are unknown. Using the optimistic approach, what is the optimal decision and what is he value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to arrive at this ecision in the second. Question 6 options:

1. Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) with the following payoff table: ecision s1 s2 s3 150 50 d1 200 200 d2 200 500 he probabilities of s1, s2, and s3 are unknown. Using the optimistic approach, what is the optimal decision and what is he value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to arrive at this ecision in the second. Question 6 options:

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 17.5IP

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