Decision THEORY SNe emai ia pte nasa n Ca. ‘eesti ts bic so ctineven Ince Fo varios feos, we vl to ssa be Bsr dion ve which ee See in mab ot ost acd by aaa pcei sete ‘Seer aons ene ‘uni de expesed macy rae ‘etn apse yea gnet Co rag tt” eo cones fa es, ete DECISION crrteninToe subi fe manip extern depends on te nate oe secs oe mae Cas Be eco prem The 35° fh mince emsioiinadewaratapesniebsectst el wool ning thse ea nc od vee Emo sey ein of oe mini py in. rf cen wt ee eh 0 oa mad Seen omet Sosa eeeniedoChapter 23 or Toms eee aa ee eames nant eee, Udon ts example Goes not emit uso conser geo encane et cei rc ese So ee eee eee aoe ee Pee eee enc: teem from igh ohwerlevcs an Dock 1 ihe level gun og tances ‘ating the supply of markeble hogs and next year's prices consequeny riz oem ectgeeree oecnceertrawr ss [oor den. Given sich s premise matin lice ct | “TIE CRITERION OF INSUFFICIENT REASON Intent ean Thin yb tween ers an toate een potas in cen vey bee sie Sn ema ute ed al eve ‘Yar thee een potbiese twthte matin expected peo sium econ neice rascals enetnsl tsi sme howd he mae shes ha evens wl oo Deneve eens ee Sap dr praetor wt ‘THE PREFERRED CRITERION, THe BAYES DECISION RULE a eon aking iio ced hae obvosinnegs ‘even copra all eon abet" ‘Sahn pity eee gent ee ere ar [aeons eee erence rho gee eae ee ase Se DECISION RULE AS THE FAVORED ‘WE BAYES: ee So aitetetacageetnemeite 23-2SS eee aete2)_ cna rides wit puso evahatg sonal owes of inoraton tama ee ee ee — ich ecbaccontimisiadoietel atic fant ‘Swett spc ie erage putea et ‘Seana pes em Septet gal bate Soke eae Seng pa dra ea yet pee ante that, although in Chapter 4 we saw bow be best availabe expense may ty ee ne en ee ‘pedo taste ay as) s yin ccd pl ie rs i ens ie eo oe eee Se Wierapettonetey pote ela tse sae Tee ‘Semen sesitpuarand mal wrconaiercset be Water Tot he tt ane i ca a eal esd Sera aes eee a setae inp andr Sut weleisttaneie mae eto tinepoers ana nmac cos ec utes rete eie ruta taeocatscemren ‘onan won hs eben met ong set ofan ean ot state expect pay in ims oso met veel cons ani expenses) suse crs Snyper ae 1h te. ‘sro ees esonne con wut Sse erwin, miami ee Sects ne nae tS eee ‘Simi beakdows ofthe hayes deion lc occur whenever resn imei er a Efe esky abet on tat ils ora itr a Sevag mi a ache rey doh acount s hatha te ne lcs ere cepa oy iegetacscrh ats ye anne cae REL arte wie itedf doar sre thera Che: oe Wl be he ry ya ppl or 9 leprae wl tent th, hes a spd aden mang pete a cep pe Fc oes gine eon see eat see ime eee eel ‘copier ing anh cn Sete cmceeeineaae a Same eno peel tg ete eh ew no ag me “een ar it tc ea eee cul cc sete ana n Fes rtepertps ee Pe miteeeeatiocmcner coon rnin ae ee any Ss one eo ‘icteric seas crg nein ‘Sena chDECISION RULE: CHOOSE THE GREATEST CERTAINTY EQUIVALENT na a se apa ten ct te Sich las memctaooemee Eeripeete stare tere oe ee eee ae ee stn pte ohne tae enrpe core ancien FINDING THE CERTAINTY EQUIVALENT tout yeu toute ie he gtr igen ptipe nt fentkingof ue ovine pie re $100, 0 ‘i ot wi dene (281,00, yeu le Nour ceraiy elon ‘ino depen! on te pbobies er ast oan. At 10 chen ining, ou woul ate pb itty ban be os ee Theis acc mantis ie of pe ml te toupee tc Aeon es Feta sateen pop ‘stn enna wm xno iene me “out wets emir elon TH pp ot ‘rs yet tmnt hg ty Paes ee ae nace fst your ena equivalents foreach gamble. Then <= ‘Pate the respective expected payoffs ee Zs ‘Tec wie Som aeRO civ om cy fet gs exe pl Tau a ‘Sarr en an bey eet pcs tap nde re: Oe ‘Se siiny ent minnie 77 Yo Sea ope hve clio compre cee: But ey ve it et secures alo ite See etal mareedt ne oe vom naiemneccei att Seaton Seca raeceasiere ‘ae nc pls) Yor ee OO Tremere SET ce ec me "Your isk premium tt pen eto once tains ‘Tae si rio rr ae mr es onl etictaper 22 omer es aoe feeeaesr peaimriere cess erin) ‘Sho sb ppene You wl ezine 31,000 i ase MS ters (anltypament lo wb aranged if yoann Sectyatend uy Senpetopon hse Be Slcmremrecinmane: = eee Expected pet = (51,0095) + (5800130 hie mand be weal S100 stat fo es eran exten = $100 ik pei 5250105150. (Shite San) inte Shite scone rive wing se rena pean avis kf gang eS Wi B Reh ede welt 20 fr ie Fon, Comin equate = 5200 Rikpemiom 5250-200 $59 Wy Bich) Saami nauremenang, sn hrierme i tain the prem maybe nerreted sth so) ice ae nt enews Eo paneer entetenleare eld esee renin vital ope nee Spuusketegeet ronan icon cna tevarna gett i Pemans wis cormen an pune td tata BSCOUNTING EXPECTED vat.ues ny unis PREMIUMS eons ge es poh 2, frayed be nce err rca foray amare sen ppt a ey eget mi penn em poe ni etter oe te a pe a Selene Sanu caiieel are rept are Senet ata enews eerintiorat rama tn nai Sere, aes ee eae ‘The my be bd Sees deta poe tome aed ei et iene ‘rd i i ae an wae ea a cataract one song aces oc oe eso at Kwon eile erty egret Snare spenosa RECORD COMPANY hate etc cnn oT SET acest ta ese a oad yen Oe enmens or fee yy orig capt a rae ee Naar nee ILLUSTRATION FONRaesmacee ey ecececms cpt Habana cops eye Exped pt = (50198) +(-S100000,.01) S100 Teco als “320 lt ieee eee ean online Damage Tie Sie ae Sone vale Nghe eine my css sch se dancre hss SO, ‘scghbrin hats murhe au woud be los Toe pendent fond (Scot ho jr ha carhune of at magne ay tengo Sexy aval habe wa coeraticnincar eas es isp vse: Hasan eqs Exec na = 559+ (-S20n000( 001) = 5209 prion =—S00—(-350) = 5300 tee) lon pei al rote seni ei noe re et the pee erat inh pn nite res stots be mci a penn tS ha meson cpa enh state Sen er sa {30200450 «100.0 le ee ih Ee Rak rein $2000 15001-51000 pnts) Ano Tie 37 be peste cgay ie aes ome cna EO SSE cn ee 8 Canaan een Ea Sn Are Ths a) (ceate- HP =760)-40-5300 te) cc lereeeys reat cr cone mae ee Re cette amit Samo sie an gamete tat et tat ncar. $00, ite 37 S——_.. Sets ae Sen eng cin nce! om (18 pint, matey emt the reser amount is roughs back 0 MES Sabogal cet pe eee Ny mt ens Baal aon fr nse TH NtSinaeote t een en spend fect kets Ie sto toh cae ad me reed mote, eso eer 9 s130,5 +1040) = 5,00 {tor 368100, weed steed cre fe Te ae ed ne $i, ne pin pmo sow 50 po ‘OPPORTUNITY LOSS AND THE EXPECTED SKLUE oF Penrect INFORMATION raeb i mgt a cee Se a acme SS cuecmeye tee coreg noe smc ee ot ee econ teeter pore ceovee nema sccm Spears cnreee nd ‘i a eto) con have ben ace oor PETE te ee ese one ‘Cat th ee rt rc ey ea ire ha wel aco Se, kN meet Sr ten Sg eet ncaa eeu 23-4‘THE BAYES DECISION RULE AND OF "PORTUNITY LOSScape tee Ss te Sage ere eet emt 2 me ar Liki $700 the rsirn pase Saree eae eee! See raceme arcana ete is ge Se one ee assist een pol nice (see ae ae aera era ee eer ees pe eer ee ire a a ee cee ee ee ee Saber enecre cette, ‘Cheyenne aye wb oan et Fin nen ce an EVP = Bx pf ane ceri ‘man cp fo 5 0 lard nT 2908 te a cera $500 EVP steno — 1350 = $3500 Sg Bt ta my be antes wo rier nee = ee nasa eee! cme ie! SRELRARE te sy ncytcoa bo EVFLAXD OPPORTUNITY Loss Javan 22208 seam ste mini exec Soman 23-10 Ts eae epee a SP APR opportunity fos forthe optima! ‘ew au a he of oe nen ‘Speci oper at qe expo pl ude coy (wih pte oman inet maa econ mig 1S eh tela ct rom pet em Marketing Strategy forExchacker ges 2 sears Meme ie ae recent wah mn Fo yimson ceo hte ic Ses me ouch aon ratereee ‘siti et ne prety cons eee ee 5 ‘Sy a aus af penn Ti hy etl Serre ern a i rie ‘Biscecent pete rman neem pane | at are eputany nes andthe rlt he Byes ectton riot” hrsnshenineomecea oe jet ane at See faces te tee ems en SESS Sines pci ne tne tae SeTEeaASinOypecn osr my ee ese eas ee ee at Reece eyperay os sway cs fr te sme at hat Preah bemameiacsee e Setar siege eg este jon. minimas opportunity fxs, under whic the best ‘es the maxinnm expec pot cro Ons ei chen Pa ey omit panty os ‘phan et en reject say Roce cea ary ar ar ene, So mn No sche a ‘Expt payot a i achieved by hain pecs rei ‘nt wor ef ny suMMaRy Semana cee a crema hat sm fh yee Ser aco sritisnerinyo™ [nM ceria empty in reaching a die cred nh He ry nt) Spee dcsonmaye Sse igen eal ROE cmottekaawn Sevres netcnuestacecy age 2.0 a ae st Zattoo er etc Se ron OD cieecansiense naan aca nm ee ee Sele cee acane cr PROBLEMS Pe epee ars oo es ae Sate arate min 41 yar cpt he in PE Sedna QR ats ronneemereee merarat SSieaetpeemntie tment core eeea er ‘eet sm bc py ieoe escent rete btn rere Tin pens ear waiioacinaen Ret een nom ui cee wuassy a a st ew couecoas ea a ae oe eat el oi He cme eae mein ne 0) ag seriecin Pee eee maine tS es lw cet amring Explor wil of couse involve no unusil es expendi ey {lor tere null be 0-0 cane for eson 20 success ern Setar nd Gross wil give DeBuRT $50.00 ‘ese Opro-ier QUESTIONS 4 Constr Klaus DeBugees cision ee aga, pacing al pa Howsand pases sonst ther respective branches Then Foren outa, net cash erformbackwardindocin using the we in Questo What cones oo asinns DeBugae’s expected net cash Ho? 3 Conser ne neerinion cise ony, (3) Seppe tht DeBuser haves o hcp Op. Miser and devs sien20. From sor dson teal Question 2 fod Sea hen he esto 1) favre n(2) "Using yo anes rom athe ppt vales fr Kecping contri DeBuge's py bl plicable un 1) tiie sig 12 Nasi hed at «a Risin erected ppt a vee fans DeBuzsers EVPI, How might this number ep DORE is ion? Wht Kinds of rediive infomation 0 co) Relating ha negation tos? “ rast eBags oppo ls ble, Which 2 mi esd oppranty ing unt subi 4 Alou es et Sine Tas gah OS people, Klaus DeBugger is never Tour amoune ene wings to buy casa nse These smu eg cape clam size, Te folowing = ry eg sated om exper payee 0 a sts enc n pts) sts erie nine ts eben nn a os es