tie4203-20-tut-02.pdf - TIE4203 Decision Analysis in Industrial Operations Management Tutorial#2 Question 1 P3.1 Suppose you can choose either Deal A or

# tie4203-20-tut-02.pdf - TIE4203 Decision Analysis in...

• 4

This preview shows page 1 - 3 out of 4 pages.

TIE4203 (2020) tut-02-1 TIE4203 Decision Analysis in Industrial & Operations Management Tutorial #2 Question 1 P3.1 Suppose you can choose either Deal A or Deal B , and you get to keep whatever you might win. Deal A : A coin is flipped. When it lands, if the side facing up is Heads, you win \$1000, otherwise nothing. Deal B : A die is rolled. If the side facing up is a One, you win \$1000, otherwise nothing. ( a ) Which deal would you choose to own, Deal A or Deal B ? Why? ( b ) Suppose now the coin is flipped and the die is rolled. The results are a Tails and a One. Do you think you had made a good decision? Why or why not. ( c ) If you were given another opportunity to choose between Deal A and Deal B before flipping the coin and rolling the die again, which would you select? Question 2 P3.2 Jo has certainty equivalents for two deals as follows: Use the substitution rule to determine Jo’s certainty equivalent for the following deal: 0.75 0.25 \$100 \$0 \$50 ~ 0.5 0.5 \$100 \$0 \$35 ~ 0.375 0.25 \$100 \$0 \$50 \$35 0.25 0.125
TIE4203 (2020) tut-02-2 Question 3 P3.3 John is rushing to the box office to buy ticket to see a new play.