Consider the following payoff table and probabilities for the states of nature: Demand Level Alternative 1 2

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Consider the following payoff table and probabilities for the states of nature:

Demand Level Alternative 1 2 3 4 A $700 $700 $700 $700 B - $200 $1,400 $1,400 $1,400 C - $1,100 $500 $2,100 $2,100 D - $2,000 - $400 $1,200 $2,800 Probability 0.15 0.40 0.15 0.30

a. Choose the best alternative using decision making under risk.

b. What is the expected value of perfect information?

Applications AppendixLO1

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Business Statistics

ISBN: 9780133852288

2nd Edition

Authors: Robert A Donnelly, Robert Donnelly Jr

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