Explore BrainMass

Explore BrainMass

    Decision Making at CoffeeTime- Expected Payoffs

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    (See attached file for full problem description)

    CoffeeTime is considering selling juices along with its other products.
    States of Nature
    High Sales Med. Sales Low Sales
    A(0.2) B(0.5) C(0.3)
    A1 (sell juices) 3000 2000 -6000
    A2 (don't sell juices) 0 0 0

    The probabilities shown above represent the states of nature and the decision maker's (e.g., manager) degree of uncertainties and personal judgment on the occurrence of each state. What is the expected payoff for actions A1 and A2 above? What would be your recommendation? Interpret the results based on practical considerations.
    b. Bayes and empirical Bayes (EB) methods structure combining information from similar components of information and produce efficient inferences for both individual components and shared model characteristics. For example, city-specific information on the profits involved in selling a particular brand of coffee in Mumbai might be unavailable. How could CoffeeTime "borrow information" from adjacent cities or other countries to employ Bayesian logic?

    © BrainMass Inc. brainmass.com December 15, 2020, 11:53 am ad1c9bdddf


    Solution Summary

    The solution provides answers to questions on the use of probability in decision making related to CoffeeTime