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Decision Theory

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Do not do D in # 8

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8) A local real estate investor in Orlando is considering thre3e alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourist; profits from the theater will be relatively stable under any conditions. The following payoff table shown the profit or loss that could result from each investment.
Gasoline Available
Investment Shortage Stable Supply Surplus
Motel $-8,000 $15,000 $20,000
Restaurant 2,000 8,000 6,000
Theater 6,000 6,000 5,000

Determine the best investment using the following decision criteria.
A. Maximax
B. Maximin
C. Minimax regret
D. N/A
E. Equal likelihood

18) The Miramar Company is going to introduce one of these new products: a widget, a hummer, or a nimnot. The market conditions (favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table.
Market Conditions
Product Favorable .2 Stable .7 Unfavorable .1
Widget $120,000 $70,000 $-30,000
Hummer 60,000 40,000 20,000
Nimnot 35,000 30,000 30,000
A. Compute the expected value for each decision tree and select the best one.
B. Develop the opportunity loss table and compute the expected opportunity loss for each product.
C. Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.
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To decide best investment using decision theory.

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Models of Decision Making: differences between rational and irrational decision making

Re-review the information in the assigned text for Unit 2 (Chapter 7, 8 & 9) and do a bit of outside research (outside the text using the AIU Library or the Internet) on the differences between rational and irrational decision making. These terms aren't static and are relatively fluid (in other words our interpretation of what is rational or irrational can change with circumstances or time).

For this project consider the fact that at one point in US history the decision to own slaves was considered rational and informed. Today we would consider the decision to own slaves "irrational". For this project:

1. Identify one other example of a decision (past or present) that was once considered "rational" but that is now reviewed as "irrational".
2. Explain, in detail, why the decision was once considered "rational" but would now be considered "irrational".
3. Identify the decision theory (from our learning in Unit 2) you believe was used in the original decision making within your example. Be sure to fully support "why" the theory you selected was present. Simply naming a theory won't be enough...you need to support your answer.

HINT HINT HINT...Part 3 asks you to identify a THEORY from our learning in Unit 2 that applies to your example. Be sure you pick a THEORY and remember you must do more than name a theory...you must also explain HOW & WHY the theory you selected specifically applies to the example you chose. Don't "define" the theory or explain the example again. YOU as the analyst must TIE the theory selected and event together)
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Do not try to answer the questions in this project or prepare your paper until AFTER you have completed the Unit 2 Activity.

Please view the attachment.

To access and complete the Unit 2 Activity click on the Course Materials link on the navigation bar that runs down the left side of the virtual classroom. Select and click on the next link titled Unit 2 Multimedia Course Material link and finally click on the "activity" icon.

Note...there are multiple scenarios within the Unit 2 activity. Your goal is to try to identify the most applicable decision concept (from our learning in Unit 2) for each scenario, support your conclusions, and then provide a summary analysis about what you've learned.

There are three (3) parts to this project. Your research paper should address each one fully and thoroughly.
Part 1: Review each situation (there are multiple scenarios within the activity) and identify which decision concept (theory, principle, model, etc.) from our learning in Unit 2 you believe to be present. Make sure you also explain (for each concept identified) "how" and "why" you arrived at your conclusion. In other words; what information helped you select each concept for each situation?

Part 2: Look at the different decision concepts you identified in part 1. What do you think those different concepts imply about how people make decisions?

Part 3: Do the decisions we make always need to be rational? Under what circumstances are we (decision makers) likely to make irrational choices?

Make sure you reinforce your work with suitable references from the text book and other authoritative and credible references, which must enhance the quality of your response. In the process please use correct APA citation style.

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