Assume you are faced with two decision alternatives and two states of nature whose profit payoff table is shown below. Decision Alternative State of Nature 1 State of Nature 2 Decision 1 25 30 Decision 2 45 15 The probability of state of nature 1 is 0.4. (a) Compute the expected value of each alternative. (b) Which decision is the optimal decision? (c) Compute the expected value with perfect information. (d) Compute the expected value of perfect information.
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Assume you are faced with two decision alternatives and two states of nature whose profit payoff table is shown below.
Decision Alternative | State of Nature 1 | State of Nature 2 |
Decision 1 | 25 | 30 |
Decision 2 | 45 | 15 |
The probability of state of nature 1 is 0.4.
(a) Compute the expected value of each alternative.
(b) Which decision is the optimal decision?
(c) Compute the expected value with perfect information.
(d) Compute the expected value of perfect information.
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