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Please double check my answers to part (a) and solve for the questions in part (b) eBook The following payoff table shows the profit for
Please double check my answers to part (a) and solve for the questions in part (b)
eBook The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives: State of Nature Decision Alternative dl d2 (a) Suppose and What is the best decision using the expected value approach? Round your answer in one decimal place. The best decision is decision alternative d2 , with an expected value of (b) Perform sensitivity analysis on the payoffs for decision alternative dl. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s: and sz that will keep the solution found in part (a) optimal. Is the solution more sensitive to the payoff under state of nature Sl or s2? Round your answer in two decimal places. The solution is more sensitive to s2 , as an increment of for dl(s2) causes a break even between the decision alternatives, whereas it takes an increment of , to provide the same effect for dl(st).
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