Refer to the Following Payoff Table

question 29

Multiple Choice

Refer to the following payoff table:

There is an option of paying $100 to have research done to better predict which state of nature will occur. When the true state of nature is S1, the research will accurately predict S1 60% of the time. When the true state of nature is S2, the research will accurately predict S2 80% of the time.
Given that the research is done, what is the joint probability that the state of nature is S1 and the research predicts S1?

• A) 0.08
• B) 0.16
• C) 0.24
• D) 0.32
• E) 0.36

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Definitions:

Incentive Pay

Additional compensation provided to employees as a means of encouraging increased productivity or performance levels.

Annual Salary

The total amount of monetary compensation that an employee receives from their employer over the course of a year.

Pay Secrecy

The practice of prohibiting employees from discussing or disclosing information about their own or others' salaries and wages.

Discharge

The act of formally releasing or dismissing an individual from their position or duties, often due to performance issues or organizational restructuring.