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

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