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Subject:
Statistics
Category: Business and Money Asked by: azbuike-ga List Price: $2.00 |
Posted:
09 Jan 2006 15:39 PST
Expires: 08 Feb 2006 15:39 PST Question ID: 431288 |
Coffee Time is considering selling juices along with its other products. States of Nature High Sales Medium Sales Low Sales A(0.2) B(0.5) C(0.3) A1 (sell juices) 3000 2000 -6000 A2 (Don't sell juices) 0 0 0 The probabilities shown above represent the states of nature and the decision markers's (e.g., manager) degree of uncertainties and personal judgment on the occurrence of each state. What is the expected payoff for actions A1 and A2 above? What would be your recommendation? Interpret the results based on practical considerations. |
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There is no answer at this time. |
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Subject:
Re: Statistics
From: ladydazz-ga on 09 Jan 2006 19:34 PST |
I searched +table +"expected value" +"states of nature" and found this pfd file: http://www.cba.uni.edu/slides/920020_Mardis/risk.pdf I know my english isn't good (it is not my mother tongue) but I hope this could help you. ---------------------------------------------------------------------------- Expected payoff for actions A1 and A2 For each action, multiply the probability of each state of nature by the sales value for that state. The sum of that products is the expected payoff for each action. E(A1) = 3000*P(A) + 2000*P(B) + (-6000)*P(C) E(A1) = 3000*(0.2) + 2000*(0.5) + (-6000)*(0.3) = -200 Expected payoff for A1 is -200 E(A2) = 0*P(A) + 0*P(B) + 0*P(C) E(A2) = 0*(0.2) + 0*(0.5) + 0*(0.3) = 0 Expected payoff for A2 is 0 ---------------------------------------------------------------------------- I would recommend don't sell juices, because you should choose the action yielding the best expected returns. In this case 0 is the highest average return. There are other decision rules and different approaches that could take to different results (such as the optimistic approach, the conservative approach. See: http://homepages.stmartin.edu/fac_staff/dstout/BA302/QMB8ch04.ppt) |
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