Question

Select the answers for questions 1-11, from the following list and write it on the answer sheet;

A) State of nature

B) Decision

C) Alternatives

D) Decision table

E) Maximin

F) Equally likely

G) Decision tree

H) Node

I) Risk

J) Favorable market

K) Expected monetary value (EMV)

L) probability

M) Expected value of perfect information (EVPI)

N) Pruned

O) Decision table

P) Maximax

1) A(n) is an occurrence or situation over which the decision maker has little or no control.

2) The square symbol used in drawing a decision tree represents a(n) node.

3) A(n) _is a tabular means of analyzing decision alternatives and states of nature.

4) is the criterion for decision making under uncertainty that finds an alternative that maximizes the minimum outcome.

5) is the criterion for decision making under uncertainty that assigns equal probability to each state of nature.

6) is the expected payout or value of a variable that has different possible states of nature, each with an associated probability

7) is the difference between the payoff under perfect information and the payoff under risk.

8) A(n) is a graphical means of analyzing decision alternatives and states of nature.

9) A branch of a decision tree that is less favorable than other available options may be

10) What is a tabular presentation that shows the outcome for each decision alternative under the various possible states of nature called?

11) Which decision rule under uncertainty results in an optimistic decision?

Answer 1

1. The state of nature: It refers to any future set of events that are not under the control of the decision maker. The decision-maker because uncertainty can do little or nothing about it.

2. Decision node; There are three types of nodes: Decision node, Chance node, End-point node and a A decision node which is represented by a square, represents a decision to be made.

3. Decision tables: are a concise visual representation for specifying which actions to perform depending on states nature.

4. Maximin: Also known as pessimistic approach. It explains that decsion maker examines only the minimum payoffs of alternatives and selects those alternative which is less painful.

5. Equally likely:  Equally likely or what is also known as Laplace criterion of insufficient reason occurs when a decision maker is uncertain as to which event will and remains in dilemma, the decision maker therefore considers that all states are equally likely. Decision maker considers that each event is equi-probable.

6. Expected monetary value: is what is the expected payout you can expect to make from a decision.

7. Expected Value of perfect information difference between the expected payoff with the perfect information and the expected payoff under risk.  

8.Decision Tree: A decision tree is a decision making tool that uses a graphical way of analysing decisions and the states of nature.

9. Pruned: A branch of decision tree that less favorable than other options may be pruned to make it more viable and rational.

10. Decision Tables: Decision Tables allows a tabular presentation of each decision alternative under different states nature. It is a tabular view of representation.

11. Maximax criterion: is an optimistic approach. It suggests that decision maker examines maximum payoffs of alternatives and choose the alternative whose outcome is the best. It is best suited for uncertain events and for those who remain extreme risk-takers.

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