The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature:
State of Nature
Decision Alternative
S1
S2
S3
d1
250
100
25
d2
100
100
75
The probabilities for the states of nature are P(s1) = 0.65, P(s2) = 0.15, and P(s3) = 0.2.
(a) What is the optimal decision strategy if perfect information were available?
s1: d1
s2: d1 or d2
s3: d2
(b) What is the expected value for the decision strategy developed in part (a)? If required, round your answer to one decimal place.
185
(c) Using the expected value approach, what is the recommended decision without perfect information?
d1
What is its expected value? If required, round your answer to one decimal place.
160
(d) What is the expected value of perfect information? If required, round your answer to one decimal place.
5