Decision Analysis Answers:

1)
Choice
 Payoff
a)
 Maximin:
 Process A
 		10
b)
 Maximax:
 Process B
 		450
c)
 Maximum Likelihood:
 Process C (or D)
 		350
d)
 Bayes (EMV):
 Process C
 		252




e)
 EVPI:
 268 - 252 = 16
f)
 Inadmissable Acts:
 Process D (dominated by Processs C)


2)


Choice
 Payoff
a)
 Maximin:
 A5
 		0
b)
 Maximax:
 A2
 		90
c)
 Maximum Likelihood:
 A3
 		80
d)
 Bayes (EMV):
 A3
 		54




e)
 EVPI:
 77 - 54 = 23
f)
 Inadmissable Acts:
 A4 (dominated by A5)


3)
Decision Tree #1
Forecast.
If "favorable," then build large store;
if "unfavorable," then build small store.
EV = $13,800


4)
 Decision Tree #2
Test market.
If "favorable," then market nationally;
if "unfavorable," then reengineer and market nationally.
EV = $190,000

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