The Alternatives 1 and 2 in the Following Payoff Table

question 28

Multiple Choice

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (Si, i = 1, 2, 3) represent the levels of demand for the company products. S1, S2 and S3 characterize high, medium and low demand with probabilities of .3, .6 and .1 respectively. The payoff values are in thousands of dollars.
$$\begin{array} { l c c c } & { \text { States of nature } } \\& \mathrm { s } _ { 1 } & \mathrm {~s} _ { 2 } & \mathrm {~s} _ { 3 } \\\text { Alternative (strategy) } 1 & 10 & 80 & 70 \\\text { Alternative (strategy) } 2 & 60 & 120 & 50\end{array}$$
-What is the maximum amount that the company would be willing to pay for perfect information?

• A)$95,000
• B)$112,000
• C)$17,000
• D)$24,000
• E)$2,000

---

Definitions:

Unconscious Drive

Deep-seated desires and motivations that influence human behavior and thought processes, often without the individual's conscious awareness.

Prefrontal Cortex

The front part of the frontal lobe in the brain, crucial for executive functions such as decision making, social behavior, and personality.

Reticular Activating System

A network of neurons located in the brainstem that plays a crucial role in regulating arousal and sleep-wake transitions.

Awareness

The knowledge or perception of a situation or fact, often referring to the ability to directly know and perceive, to feel, or to be cognizant of events.