Decision Analysis Answers


1)  Spreadsheet


Choice
 Payoff
a)
 Maximin:
 A3
 0
b)
 Maximax:
 A2
 80
c) Minimax Regret:
 A3
 60
d)
 Maximum Likelihood:
 A4
 60
e)
 Bayes:
 A1
 32
f) Expected Opportunity Loss:
 A1
 36

g)
 EVPI:
 36 (68 - 32)
h)
 Inadmissable Acts:
 (none)


2)  Spreadsheet


Choice
 Payoff
a)
 Maximin:
 A5
 		0
b)
 Maximax:
 A2
 		90
c) Minimax Regret:
 		A2 or A5
 		90
d)
 Maximum Likelihood:
 A3
 		80
e)
 Bayes:
 A3
 		54
f) Expected Opportunity Loss:
 		A3
 		23

g)
 EVPI:
 23 (77 - 54)
h)
 Inadmissable Acts:
 A4 (dominated by A5)


3)  Spreadsheet


Choice
 Payoff
a)
 Maximin:
 A5
 		10
b)
 Maximax:
 A2
 		90
c) Minimax Regret:
 		A5
 		80
d)
 Maximum Likelihood:
 A3
 		80
e)
 Bayes:
 A3
 		66
f) Expected Opportunity Loss:
 		A3
 		11

g)
 EVPI:
 11 (77 - 66)
h)
 Inadmissable Acts:
 A4 (dominated by A5)


4)
Decision Tree #1
Forecast.
If "Favorable," then build large store;
if "Unfavorable," then build small store.

EV = $13,800


5)
 Decision Tree #2
Test market.
If "Favorable," then market nationally;
if "Unfavorable," then reengineer and market nationally.

 EV = $190,000

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