Question

The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives: State of Nature Decision Alternative s1 S2 101 4 (a) Suppose P(si)-0.2 and P(s2)-0.8. What is the best decision using the expected value approach? Round your answer in one decimal place. The best decision is decision alternative d2 v , with an expected value of 3.2 (b) Perform sensitivity analysis on the payoffs for decision alternative di. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s1 and s2 that will keep the solution found in part (a) optimal. Is the solution more sensitive to the payoff under state of nature si or s2 Round your answer in two decimal places. 2.8for d1(52) The solution is more sensitive to s2 causes a break even between the decision alternatives, whereas it takes an increment of the same effect for di(s1) as an increment of , to provide 2

Answer 1

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0.5 is correct for part which is wrong