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The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature. Decision Alternative States of Nature
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.
Decision Alternative | States of Nature | ||
---|---|---|---|
s1 | s2 | s3 | |
d1 | 270 | 120 | 45 |
d2 | 120 | 120 | 95 |
Suppose that the decision maker obtained the probabilities
P(s1) = 0.65, P(s2) = 0.15,
and
P(s3) = 0.20.
Use the expected value approach to determine the optimal decision.
EV(d1)=
EV(d2)=
The optimal decision is ? d d .
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