The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature:
Decision alternative S1 S2 S3
d1 200 160 -30
d2 180 210 -20
If the decision maker estimates the following probabilities for the three states of nature: P(s1) = 0.1, P(s2) = 0.5, and P(s3) = 0.4
(i) Find the best decision to be made. Include the risk profile associated with your choice.
(ii) Find the expected value of perfect information.
(iii) If the probability info were not available, what decision would have been best according to the conservative approach?