What is decision theory? What is the difference between a payoff table and an expected payoff table? In the following payoff table, let P(S1) = 0.30, P(S2) = 0.50, and P(S3) = 0.20. Compute the expected monetary value for each of the alternatives. What decision would you recommend?
State of Nature
Alternative S1 S2 S3
A1 $50 $70 $100
A2 $90 $40 $80
A3 $70 $60 $90
Decision theory is an area of study which analyses decisions and their consequences. Decision theory is the study of values, uncertainties and other issues in a given decision and the ...
This solution is comprised of a detailed explanation of the various aspects of Decision Analysis. This step-by-step calculation of these complicated topics provides students with a clear perspective of Payoff Table, Expected Payoff Table, Expected Monetary Value etc.