A decision maker has prepared the following payoff table.States of NatureAlternativeHighLowBuy9510Rent6535Lease4550Prior Probability0.80.2Using Baye's Decision Rule, what is the best decision and the expected payoff? (Round your answer to 1 decimal place.)Best decisionPayoffPrev1 of 5Next >

ANSWER : By using Baye's decision rule Buy alternative : 95*0.8+10*.02 = 76+2Expected Payoff = 78…

Answered: A decision maker has prepared the…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.3: Single-stage Decision Problems

Problem 5P

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A decision maker has prepared the following payoff table. States of Nature Alternative High Low Buy 95 10 Rent 65 35 Lease 45 50 Prior Probability 0.8 0.2 Using Baye's Decision Rule, what is the best decision and the expected payoff? Best decision Payoff