A decision maker faced with four decision alternatives and four states of nature develops the following profit payoff table.

Decision
Alternative States of Nature
s1

s2

s3

s4

d1

16 11 12 7
d2

13 12 10 9
d3

11 12 12 13
d4

10 12 13 15
The decision maker obtains information that enables the following probabilities assessments:

P(s1) = 0.5, P(s2) = 0.2, P(s3) = 0.2, and P(s4) = 0.1.

(a) Use the expected value approach to determine the optimal decision.

EV(d1) ________

EV(d2) ________

EV(d3) _______

EV(d4) _______

Which Is the optimal decision? d₁ d₂ d₃ d₄ .

(b) Now assume that the entries in the payoff table are costs. Use the expected value approach to determine the optimal decision.

Which is the optimal decision? d₁ d₂ d₃ d₄ .