Question
A government is deciding its action about the pandemic. If the government takes no action, then with 20% chance, the pandemic will disappear and cost
A government is deciding its action about the pandemic. If the government takes no action, then with 20% chance, the pandemic will disappear and cost will not be incurred; but with 80% chance, the pandemic will hurt the society and a cost of 2 (K + 10) billion dollars will be incurred. If the government decides a full closure, then a cost of K+ 10 billion dollars will be incurred, and the pandemic will disappear. If the government vaccinates the society, the vaccines will cost K + 2 billion dollars; with 30% chance, the pandemic will hurt the society and a cost of 2 (K + 10) billion dollars will be incurred; and with 70% chance, the pandemic will disappear, and no cost will be incurred. Given that the government is an expected cost minimizer, what is the optimal decision? Draw the corresponding decision tree and find the optimal decision.
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