COMMERCE 3QA3 Lecture Notes - Lecture 18: Decision-Making
9 Mar 2018
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Document Summary
All of the payoffs in the payoff chart come from chapter 1 business decision model. As a business decision maker you cannot pick the payoffs, you can pick the alternatives (large, small, nothing). Performance measure is usually called the payoff. Decision making under risk means you know probabilities, so the minute you know probabilities you go from (ii) to (iii) and (iv) but it will depend on if its one stage or two or more stages. Example we are doing in this lecture break even analysis examples are also decision making under certainty. Example da-2b; we are given that they equal eachother at some point. So we must pick a value of q that leads us to being indifferent. We test for q= to 0 by plugging it back into alternative a and b total cost. Performance matrix (several performance measures and several alternatives).
