- Question 2 You Are Given The Following Payoff Table In Units Of Thousands Of Rands For A Decision Analysis Problem Sh 1 (111.04 KiB) Viewed 18 times
Question 2 You are given the following payoff table (in units of thousands of Rands) for a decision Analysis Problem. Show all formulas and calculations. Alternatives State of Nature S1 S2 S3 A1 17000 11000 A2 Prior Probability 22000 20000 0,6 18000 0,3 15000 0,1 a. Which alternative should be chosen under the maximin payoff criterion? (1 Mark) b. Which alternative should be chosen under the maximum likelihood criterion? (1 mark) C. Which alternative should be chosen under Bayes decision rule? (2 Marks) d. Using Bayes decision rule, do sensitivity analysis graphically with respect to the prior probabilities of states S1 and 52 (without changing the prior probability of state S3) to determine the crossover point where the decision shifts from one alternative to the other. Then use algebra to calculate this crossover point. (6 Marks) e. Repeat part (d) for the prior probabilities of states S1 and 53. (6 Marks) f. Repeat part (d) for the prior probabilities of states S2 and 53. (6 Marks) g. If you feel that the true probabilities of the states of nature are within 10 percent of the given prior probabilities, which alternative would you choose? (2 Marks)