QUESTION 5: The following is a pay-off table describing opportunities for four different projects and their rewards in four different states of the world. For each state, the probability of that state is given in parentheses. For example, the probability of State 1 is 0.35; the probability of State 2 is 0.15, and so on…. States S1(0.35) S2(0.15) S3(0.25) S4(0.25) 107,500 90,000 -20,000 53,500 Projects -10,000 66,500 75,000 90,500 97,000 -33,000 80,000 74,000 80,000 80,500 80,000 -23,500 (a) (4 pts) If the decision-maker is conservative, what decision he/she will make? Show all work and explain what method you used and why you have used such a method. (b) (4 pts) What decision will be made under the minimax regret criterion? (c) (4 pts) Up to how much would you be willing to pay a consulting firm to provide you with the perfect information? Solution Ok if you want the answer rate my as lifesaver first. Im tired of spending 20 minutes doing a solution and then the person just takes the answer and doesnt rate my answer. PM me for the answer once you have rated it..

1. QUESTION 5:
The following is a pay-off table describing opportunities for four different projects and their
rewards in four different states of the world. For each state, the probability of that state is given
in parentheses. For example, the probability of State 1 is 0.35; the probability of State 2 is 0.15,
and so on….
States
S1(0.35) S2(0.15) S3(0.25) S4(0.25)
107,500 90,000 -20,000 53,500
Projects -10,000 66,500 75,000 90,500
97,000 -33,000 80,000 74,000
80,000 80,500 80,000 -23,500
(a) (4 pts) If the decision-maker is conservative, what decision he/she will make? Show all work
and explain what method you used and why you have used such a method.
(b) (4 pts) What decision will be made under the minimax regret criterion?
(c) (4 pts) Up to how much would you be willing to pay a consulting firm to provide you with
the perfect information?
Solution
Ok if you want the answer rate my as lifesaver first. Im tired of spending 20
minutes doing a solution and then the person just takes the answer and doesnt rate my answer.
PM me for the answer once you have rated it.