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Decision Making

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Decision making under risk is a probabilistic decision situation.
True
False

The several criteria (maximax, maximin, equally likely, criterion of realism, minimax) used for decision making under uncertainty may lead to the choice of different alternatives.
True
False

One disadvantage of using decision trees when making sequential decisions is that the tree does not give good depictions of the sequential aspect of the decisions.
True
False

In a decision problem where we wish to use Bayes' theorem to calculate posterior probabilities, we should always begin our analysis with the assumption that all states of nature are equally likely, and use the sample information to revise these probabilities to more realistic values.
True
False

A pessimistic decision making criterion is
a. maximax.
b. equally likely.
c. maximin.
d. decision making under certainty.
e. minimax.

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Solution Summary

The solution discusses

Decision making under risk is a probabilistic decision situation.

The several criteria (maximax, maximin, equally likely, criterion of realism, minimax) used for decision making under uncertainty may lead to the choice of different alternatives.

One disadvantage of using decision trees when making sequential decisions is that the tree does not give good depictions of the sequential aspect of the decisions.

In a decision problem where we wish to use Bayes' theorem to calculate posterior probabilities, we should always begin our analysis with the assumption that all states of nature are equally likely, and use the sample information to revise these probabilities to more realistic values.

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1) True, because in probabilistic models, the decision-maker is concerned not only with the outcome ...

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  • MBA, California State University, Sacramento
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