Question

2. Use the following table to answer a-d. The payoffs are in COSTS. Decision\ State of Nature S1 S2 S3 S4 A1 10 35 25 15 A2 10 15 45 10 A3 15 0 65 35 A4 30 30 10 30 Using different criteria identify, what is the best alternative and associated payoff? a. Optimistic criterion:   Decision:________ b. Pessimistic criterion ______________________________ Decision:________

Answer 1

a.for Optimistic criterion we will get maximum from each alternative and choose the alternative with best payoff.

hence payoff =65

and decision: A3

b)

similarly pessimistic criterion will have maximum of minimum payoff alternative

hence payoff=10

and decision can be any of A1 ; A2 ; A4