ADMS 3300 Study Guide - Midterm Guide: Utility, Expected Value Of Perfect Information, Perfect Information

• School: York University
• Department: Administrative Studies
• Course: ADMS 3300
• Professor: Malcolm Mac Taggart

Document Summary

Chapter 4: decision analysis: decision alternative (d1, d2 ) and state of nature (s1, s1 ) payoff (consequence $, #). Dm without probability: optimistic, conservative, & minimax regret approach. Minimax regret chooses d3. (n=# state, p(s)=prba, v=payoff) Probabilities of s1, s1, s1 is 0. 3, 0. 45, and 0. 25. Lowest cost s1 = 400, s2 = 600, s3 = 300. Evpi = | 400 : risk analysis: helps the decision maker recognize the dif btw ev of a decision. Alternative and the payoff that might actually occur. Decision analysis with sample information: risk avoider & take (eu), neutral (ev) Effeciency rating (e) of si: e = (evsi / evpi) x 100 = #% Ty has to invest in stock a, b, & c. and return can be high (h), medium (m) & low (l). Ty can hire advisor to forecast favorable or unfavorable. P(f| s3) = . 4 p(u| s3) = . 6. P(u) = 1 p(f) (see deccision tree)