Exam 3: Decision Analysis

What is the difference between the Expected Monetary Value and Expected Value with Perfect Information?

A utility curve showing utility increasing at an increasing rate as the monetary value increases represents

Any problem that can be represented in a decision tree can be easily portrayed in a decision table.

The following is a payoff table giving costs for various situations. What are the regret values for Alternative 3 as read from State 1 to State 3?

Utility theory provides a decision criterion that is superior to the EMV or EOL in that it may allow the decision maker to incorporate her own attitudes toward risk.

Mark M.Upp has just been fired as the university book store manager for setting prices too low (only 20 percent above suggested retail).He is considering opening a competing bookstore near the campus, and he has begun an analysis of the situation.There are two possible sites under consideration.One is relatively small, while the other is large.If he opens at Site 1 and demand is good, he will generate a profit of $50,000.If demand is low, he will lose $10,000.If he opens at Site 2 and demand is high he will generate a profit of $80,000, but he will lose $30,000 if demand is low.He also has decided that he will open at one of these sites.He believes that there is a 50 percent chance that demand will be high.He assigns the following utilities to the different profits: U(50,000)= ? U(-10,000)= 0.22 U(80,000)= 1 U(-30,000)= 0 For what value of utility for $50,000, U(50000), will Mark be indifferent between the two alternatives?

Bayes' theorem enables decision makers to revise probabilities based on

Briefly describe decision making under certainty.