DECISION THEORY

DECISION UNDER UNCERTAINTY

E1:18 books would be demanded.
E2:19 books would be demanded.
E3:20 books would be demanded.
E4:21 books would be demanded.
E5:22 books would be demanded.
E6:23 books would be demanded.

S1: To Buy 18 Copies of the book.

S2: To Buy 19 Copies of the book.
S3: To Buy 20 Copies of the book.
S4: To Buy 21 Copies of the book.
S5: To Buy 22 Copies of the book.
S6: To Buy 18 Copies of the book.
 Profit Table
S1:18 S2:19 S3:20 S4:21 S5:22 S6:23
E1:18 360 310 260 210 160 110
E2:19 360* 380 330 280 230 180
E3:20 360*
E4:21
 PAYOFF TABLE
Strategy
Event
S1:18 S2:19 S3:20 S4:21 S5:22 S6:23

E1:18 360 310 260 210 160 110

E2:19 360 380 330 280 230 180

E3:20 360 380 400 350 300 250

E4:21 360 380 400 420 370 320

E5:22 360 380 400 420 440 390

E6:23 360 380 400 420 440 460

 LOSS TABLE TABLE
Strategy
Event
S1:18 S2:19 S3:20 S4:21 S5:22 S6:23

E1:18 0 50 100 150 200 250

E2:19 20 0 50 100 150 200

E3:20 40 20 0 50 100 150

E4:21 60 40 20 0 550 100

E5:22 80 60 40 20 0 50

E6:23 100 80 60 40 20 0
1. LAPLACE PRINCIPLE
2. MAXIMIN OR MINIMAX RULE (PESSIMISM RULE)
CONTD..
3. MAXIMAX OR MINIMIN RULE (OPTIMISIM RULE)
CONTD….
4. HURWICZ APLHA RULE OR HURWICZ PRINCIPLE
SAVAGE RULE (NOTE-FOR THIS RULE ONLY WE
USE LOSS TABLE)
 PAYOFF TABLE
Probability Strategy
Event
S1:18 S2:19 S3:20 S4:21 S5:22 S6:23

E1:18 0.05 360 310 260 210 160 110

E2:19 0.10 360 380 330 280 230 180

E3:20 0.30 360 380 400 350 300 250

E4:21 0.40 360 380 400 420 370 320

E5:22 0.10 360 380 400 420 440 390

E6:23 0.05 360 380 400 420 440 460

 Strategy

Event Probability

S1:10 S2:11 S3:12

E1:10 0.3333 50 45 40

E2:11 0.3333 50 55 50

E3:12 0.3333 50 55 60
OPPORTUNITY LOSS TABLE / REGRET TABLE/ SAVAGE RULE

Strategy

Event
Crop A Crop B Crop C

High 0 4500 3000

Medium 500 500 0

Low 3000 0 1000

 Strategy

Event Probability
S1:15 S2:16 S3:17 S4:18

E1:15 0.10 45 42 39 36

E1:16 0.20 45 48 45 42

E2:17 0.40 45 48 51 48

E4:18 0.30 45 48 51 54