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The following decision tree has been developed, but its EMVs and TRUE/FALSE values have been grayed out. Assuming that the decision maker is an EMV
The following decision tree has been developed, but its EMVs and TRUE/FALSE values have been grayed out. Assuming that the decision maker is an EMV maximizer, which of the following is true? Branch #1 80.ON 24.0% 1000 900 Decision 2a Chance Branch #2 20.0% 6.0% .400 -500 Decision Branch #1 30.0% Decision 2b 0.0%% -100 Decision in Chance -100 Branch #1 20.0%% 0.0%% 500 Chance Decision 3a Branch #2 80.ON 0.0% -300 -400 Branch #2 70.0% Decision Decision 3b 70.0% -100 Decision Decision Tree Branch #1 40.0% 0.0% 500 Decision ib Chance Branch #2 60.09% 0.0% -200 -200 a. The best strategy is decision 1b, with an EMV of $80. However, if the immediate cost of decision 1a, currently $100, were decreased to $50, the best strategy would be decision 1a and then decision 2b (if outcome 1a occurs) or decision 3a (if outcome 1b occurs). The EMV of this strategy would be $166. O b. The best strategy is decision 1a and then decision 2a (if outcome la occurs) or decision 3b (if outcome 1b occurs). The corresponding EMV is $116. However, if the immediate cost of decision 1a, currently $100, were increased to $200, the best strategy would be decision 1b, with an EMV of $80. O c. The best strategy is decision a and then decision 2b (if outcome 1a occurs) or decision 3a (if outcome 1b occurs). The corresponding EMV is $116. However, if the immediate cost of decision 1a, currently $100, were increased to $200, the best decision would be decision 1b, with an EMV of $80. d. The best strategy is decision 1b, with an EMV of $80. However, if the immediate cost of decision 1a, currently $100, were decreased to $50, the best strategy would be decision 1a and then decision 2a (if outcome 1a occurs) or decision 3b (if outcome 1b occurs). The EMV of this strategy would be $166
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