Decision AnalysisPartII(1,15)

Decision AnalysisPartII(1,15) - Decision Analysis Continued...

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Decision Analysis Continued Example:   Good   Fair   Poor   Apar t m e nt   5 0 ,0 0 0   2 5 ,0 0 0   10 ,0 0 0   O f f ic e   10 0 ,0 0 0   3 0 ,0 0 0   - 4 0 ,0 0 0   W ar e h ous e   3 0 ,0 0 0   15 ,0 0 0   - 10 ,0 0 0   P(scenario) 0.2 0.7 .1 Question: Which approach should we use? Question : When can we use Hurwicz approach?
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Decision-Making with Probabilities a) Expected Value Criterion
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Decision-Making with Probabilities b )  Ex pe c t e d  Value  of  Pe r f e c t  I nf or m at ion:       Good   Fair   Poor   O ut c om e   10 0 ,0 0 0   3 0 ,0 0 0   10 ,0 0 0   P(s c e nar io)    0 .2      .7       .1 
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Decision-Making with Probabilities Question: How much would you pay a clairvoyant? How much would you pay for perfect information?
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with Probabilities c) Sequential Trees: Example: You expect with probability 0.8 Intel’s stock price to go up which would lead to 100$ in profits. However, if the stock price goes down, you would lose
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Decision AnalysisPartII(1,15) - Decision Analysis Continued...

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