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Probability and Decision Analysis A smartphone supplier in Sydney is considering three alternative investment options: a large...

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Statistics

Probability and Decision Analysis

A smartphone supplier in Sydney is considering threealternative investment options: a large store, a small store, or anoutlet in the shopping mall.  

Profits from selling smartphones will be affected by thecustomer demand for smartphones in Sydney. The following payofftable shows the profit that could result from each investment, indollars ($).  

Investment type

Customer Demand

Low

Medium

High

Large Store  

7,000  

6,000  

5,000  

Small Store  

2,000  

8,000  

6,000  

Outlet in Shopping Mall  

8,000  

15,000  

20,000  

Probability  

0.2  

0.5  

0.3  

  1. What choice should be made by the optimistic decisionmaker?

  1. What choice should be made by the pessimistic decisionmaker?

  1. Compute the regrettable from the data.

  1. What decision should be made under minimax regretapproach?

  1. What choice should be made under the expected valueapproach?

With excel

Answer & Explanation Solved by verified expert
3.7 Ratings (310 Votes)
What choice should be made by the optimistic decision maker An optimistic decisionmaker chooses the alternative whose maximum payoff is the maximum of the maximum payoffs of all the alternatives The maximum payoff of Large store 7000 The maximum payoff of Small store 8000 The maximum payoff of outlet in the shopping mall 20000 The maximum of the maximum payoffs is 20000 pertaining to an outlet in the shopping mall    See Answer
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