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  • Acc 112 Exercise 1

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    BRENT DECHERY BARCO
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    The document presents a payoff table showing the profits of 3 alternatives under different demand scenarios. The probabilities of low, medium, and high demand are given. The most optimistic choice is alternative 3 with a payoff of 150 in the high demand scenario. The most pessimistic choice is alternative 2 with a consistent payoff of 90. With the original probabilities, alternative 1 has the highest expected monetary value of 110. When the probabilities are equalized to one-third each, alternative 1 remains the best choice with an expected value of 112.2.

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    The document presents a payoff table showing the profits of 3 alternatives under different demand scenarios. The probabilities of low, medium, and high demand are given. The most optimistic choice is alternative 3 with a payoff of 150 in the high demand scenario. The most pessimistic choice is alternative 2 with a consistent payoff of 90. With the original probabilities, alternative 1 has the highest expected monetary value of 110. When the probabilities are equalized to one-third each, alternative 1 remains the best choice with an expected value of 112.2.

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    9 views2 pages

    Acc 112 Exercise 1

    Uploaded by

    BRENT DECHERY BARCO
    The document presents a payoff table showing the profits of 3 alternatives under different demand scenarios. The probabilities of low, medium, and high demand are given. The most optimistic choice is alternative 3 with a payoff of 150 in the high demand scenario. The most pessimistic choice is alternative 2 with a consistent payoff of 90. With the original probabilities, alternative 1 has the highest expected monetary value of 110. When the probabilities are equalized to one-third each, alternative 1 remains the best choice with an expected value of 112.2.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 2

    Exercise 1

    The following payoff table provides profits based on various possible decision alternatives and various leve

    State of Nature
    Demand
    Alternatives Low Medium High
    Alternative 1 80 120 140
    Alternative 2 90 90 90
    Alternative 3 50 70 150

    The probability of a low demand is 0.40, while the probability of medium and high demand is 0.30 each.

    Requirements:
    1. What decision would be the most optimist make?
    Alternative 3 - 150

    2. What decision would be a pessimist make?


    Alternative 2 - 90

    3. What is the highest possible expected monetary value?


    Decision Low Medium High $
    Alternative 1 80(0.40) 120(0.30) 140(0.30) 110
    Alternative 2 90(0.40) 90(0.30) 90(0.30) 90
    Alternative 3 50(0.40) 70(0.30) 150(0.30) 86
    Alternative 1 - 110

    4. Suppose the probability of each scenario is one-third, what is the highest possible expected monetary v
    Decision Low Medium High $
    Alternative 1 80(0.33) 120(0.33) 140(0.33) 112.2
    Alternative 2 90(0.33) 90(0.33) 90(0.33) 89.1
    Alternative 3 50(0.33) 70(0.33) 150(0.33) 89.1
    Alternative 1 - 112.2
    ernatives and various levels of demand.

    h demand is 0.30 each.

    sible expected monetary value?

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