In the Following Profit Table, D_i Represents Decision Variables and S_i

question 16

Short Answer

In the following profit table, d_i represents decision variables and S_i represents states of nature.
$\begin{array}{c|cccc}& \mathrm{S}_{1} & \mathrm{~S}_{2} & \mathrm{~S}_{3} & \mathrm{~S}_{4} \\\hline\mathrm{d}_{1} & 15.00 & 15.00 & 15.00 & 15.00 \\\mathrm{~d}_{2} & 10.00 & 5.00 & 25.00 & 25.00 \\\mathrm{~d}_{3} & 35.00 & 0 & 40.00 & 60.00 \\\mathrm{~d}_{4} & 60.00 & 20.00 & 50.00 & 90.00\end{array}$
a. If management assigns probabilities as follows: S₁ = 0.15; S₂ = 0.25; S₃ = 0.40; and S₄ = 0.20, determine the expected value for d₂.
b. Determine the expected value for d₃.
c. Assuming the largest expected value for a decision variable is 24.00; determine the value of perfect information.

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