Facultad de Ciencias Jurídicas y Sociales

CORPORATE DECISION METHODS 11/ 2021

Family name, Given name:

Degree:

Group: Campus:

ID/Passport: Date:

Mark the correct option in the following table:

Question a b c d
Question 1
Question 2
Question 3
Question 4
Question 5
Question 6
Question 7
Question 8
Question 9
Question 10
Question 11
Question 12

MARKINGS:
5 1 5
Right answer + 6 Wrong − 3 · 6 Unanswered 0

A right answer is ONLY considered if the approach, development

and solution have been carried out correctly and it has been
correctly marked in the corresponding box

The minimum mark to pass is 5,0

Length of the test: 90 minutes.

This test is 7 pages long. Do not remove or add any page. Any
tampering with the test will be considered as an invalid answer.

C1
Facultad de Ciencias Jurídicas y Sociales
CORPORATE DECISION METHODS 11/ 2021

Problem 1. Questions 1, 2 and 3

Angel needs to decide among five vocational destinations: city, beach, river, mountain
or forest. Angel could have a good experience, an average experience or a bad
experience.

We asked Angel to make an evaluation (where the best value is 100 and the worst is 1)
of any combination and they said that with the city with a good experience is 96, a
average experience is 54 and a bad experience is 15. For the beach, a good experience is
88, a average experience is 47 and a bad experience is 24. For the river, a good
experience is 99, a average experience is 48 and a bad experience is 12. For the
mountain, a good experience is 81, a average experience is 38 and a bad experience is 3.
For the forest, a good experience is 91, a average experience is 54 and a bad experience
is 12.

1. What is the optimal decision if you think in the best-case scenario?

a. City
b. Beach
c. River
d. There are more than one optimal

2. What is the optimal decision if you have a pessimistic index of 4/5?

a. City
b. Beach
c. River
d. There are more than one optimal

3. What is the optimal decision if you assume equiprobability?

a. City
b. Beach
c. River
d. There are more than one optimal

C2
Facultad de Ciencias Jurídicas y Sociales
CORPORATE DECISION METHODS 11/ 2021

Problem 2. Questions 4, 5

Jordan must where to invest an extra money they have. There are 3 possible
investments.

The first investment has a 25% probability to have a benefit of 100€, a 50% to have a
benefit of 120€ and the other case is getting 0.

The other investment has two steps, in the first step we can get nothing with a 30% of
probability but if we get the second step then the possible benefits are 80€, 120€ and
180€ with the same probability.

4. What is the optimal decision?

a. Make the first investment

b. Make the second chain of investments
c. Do not invest
d. There are more than one optimal

5. What is the expected value in the optimal decision?

a. Lower than 50 euros

b. Lower than 125 euros, bigger or equal to 50 euros
c. Lower than 150 euros, bigger or equal to 125 euros
d. Bigger or equal to 150 euros

C3
Facultad de Ciencias Jurídicas y Sociales
CORPORATE DECISION METHODS 11/ 2021

Problem 3. Questions 6, 7, 8, 9

Albert must decide their company strategy for the next year. They can focus on
realizing a new product of update an existing one. The have two rival companies that
can release or not a new product. Albert estimates a probability of 30% that at least one
release a new product and 15% that both rival companies release a new product.

A new update is a sure benefit of 100 but a new release depends on the other companies.
The release will be a benefit of 200 if there is no competition, 110 if there is only one
new product from a rival and 40 if there are two rivals.

Albert can pay former worker of the rival companies to get some data. If one or both
rivals were to release a product, then the rumors 90% that there will be competition. If
none of the rivals were to release a product, then the rumors 30% that there will be
competition.

6. Before using the rumors, which is the best option?

a. Update
b. New product
c. Both are optimal
d. Neither are optimal

7. What is the probability of not having rumors of competition?

a. Lower than 0.1
b. Lower than 0.3, bigger or equal to 0.1
c. Lower than 0.6, bigger or equal to 0.3
d. Bigger or equal to 0.6

8. In the case of rumors saying competition, which is the best option?

a. Update
b. New product
c. Both are optimal
d. Neither are optimal

9. In the units of Albert’s evaluation, which is the value of the rumors?

a. Lower than 40
b. Lower than 80, bigger or equal to 40
c. Lower than 160, bigger or equal to 80
d. Bigger or equal to 160

C4
Facultad de Ciencias Jurídicas y Sociales
CORPORATE DECISION METHODS 11/ 2021

Problem 4. Questions 10, 11

River must choose between three lotteries:

ℎ1 ℎ2 ℎ3 ℎ4 𝑤1 𝑤2 𝑤3 𝑠1 𝑠2 𝑠3 𝑠4 𝑠5
𝐻=( ) 𝐿=( ) 𝑆=( )
0.1 0.3 0.4 0.2 0.3 0.3 0.4 0.1 0.3 0.2 0.2 0.2
where the results “hi”, “wi” and “si” have the evaluations of
u(h1)=10, u(h2)=8, u(h3)=5, u(h4)=2
u(w1)=12, u(w2)=9, u(w3)=5
and
u(s1)=9, u(s2)=8, u(s3)=7, u(s4)=6, u(s5)=5.

10. Which of the lotteries is more profitable (in the Luce-Raiffa sense)?
a. Lottery H
b. Lottery W
c. Lottery S
d. More than one lotteries are optimal

11. What is the difference between the final evaluation for the two lotteries?
a. Lower than 0.5
b. Lower than 1, bigger or equal to 0.5
c. Lower than 1.5, bigger or equal to 1
d. Bigger or equal to 1.5

Problem 5. Question 12`

Given the utility function u(x)=𝑒 𝑥 + 𝑥 2 (when x>3)

12. Which is the attitude classification?

a. Avoid risk, with tendency to avoid risk

b. Avoid risk, with tendency to addiction to risk
c. Addicted to risk, with tendency to avoid risk
d. Addicted to risk, with tendency addiction to risk

C5