Question

A gas exploration company drills for gas in the North Sea and categorises gas fields into small, normal and large depending on the likely profits from finds. The company has to decide whether to develop a find quickly, which is costly but has a competitive advantage, or more slowly, which is less costly but subject to competition. The payoff matrix for the decision alternatives under possible finds is given below: Decision alternative Fast development Slow development Small 109 88 Find (£m) Normal 143 109 Large 166 109 The gas exploration company does not know anything about the probabilities of find. Which development alternative would you recommend to the gas company under the equal likelihood (Laplace) approach? A. Fast development B. Indifferent between alternatives C. Slow development What is the expected profit (£m) for this alternative? Write your answer to one decimal place.

          A gas exploration company drills for gas in the North Sea and categorises gas fields into small, normal and large depending on the likely profits from finds. The company
has to decide whether to develop a find quickly, which is costly but has a competitive advantage, or more slowly, which is less costly but subject to competition. The payoff
matrix for the decision alternatives under possible finds is given below:
Decision alternative
Fast development
Slow development
Small
109
88
Find (£m)
Normal
143
109
Large
166
109
The gas exploration company does not know anything about the probabilities of find. Which development alternative would you recommend to the gas company under the
equal likelihood (Laplace) approach?
A. Fast development
B. Indifferent between alternatives
C. Slow development
What is the expected profit (£m) for this alternative?
Write your answer to one decimal place.

A gas exploration company drills for gas in the North Sea and categorises gas fields into small, normal and large depending on the likely profits from finds. The company
has to decide whether to develop a find quickly, which is costly but has a competitive advantage, or more slowly, which is less costly but subject to competition. The payoff
matrix for the decision alternatives under possible finds is given below:
Decision alternative
Fast development
Slow development
Small
109
88
Find (£m)
Normal
143
109
Large
166
109
The gas exploration company does not know anything about the probabilities of find. Which development alternative would you recommend to the gas company under the
equal likelihood (Laplace) approach?
A. Fast development
B. Indifferent between alternatives
C. Slow development
What is the expected profit (£m) for this alternative?
Write your answer to one decimal place.

Added by Andrea R.

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