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Calculation of Expected Opportunity Loss

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The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

States A1 A2 A3
1 12 -2 8
2 4 10 5

where: S1 is state of nature 1 A1 is action alternative 1
S2 is state of nature 2 A2 is action alternative 2
A3 is action alternative 3

Referring to the above table, the opportunity loss for A2 when S1 occurs is
a. -2
b. 0
c. 5
d. 14

Referring to the above table, if the probability of S1 is 0.2 and S2 is 0.8,
then the expected opportunity loss (EOL) for A1 is
a. 0
b. 1.2
c. 4.8
d. 5.6

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The solution gives step by step procedure for the calculation of Expected opportunity loss (EOL).

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The following payoff table shows profits associated with a set of 3
Alternatives under 2 possible states of nature.

States A1 A2 A3
1 12 -2 8
2 4 10 5 ...

Purchase this Solution
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