INSTRUCTIONS
Make sure to read ALL instructions for each problem as many have been altered to fit my requirements/style versus the book’s specific questions. Any drawings you do for homework can either be done via computer or by hand. Hand drawn can be submitted by taking a photo with your phone, sending the file to your email, saving it, and then submitting.
Page 99 Problem 3-20 and 3-21 USE THIS CHART to practice the 5 Criterion for Making Decisions under Uncertainty (SHOW YOUR WORK) and show your selections (highlight your best alternative) for each of the 5 techniques ie Maximax, Maximin, Hurwicz Realism (use alpha = .7), LaPlace, and Minimax Regret. ** Do NOT answer the specific questions as written in the book. You are practicing on ALL of the methods for decision making under uncertainty. *see previous note to use alpha = .7 for Hurwicz. THEN, using the probabilities provided in the chart, calculate the EMV and EOL for each alternative and select the best alternative. FINALLY, calculate what is the maximum amount that should be paid for a perfect forecast EVPI???
Pg 100 Problem 3-24 USE THIS CHART to practice the 5 Criterion for Making Decisions under Uncertainty ……….. same directions as above for Problem 3-20 and 3-21 ………. practice all 5 criteria models (SHOW YOUR WORK), highlight the best alternative for each criteria. Again, use .7 alpha for Hurwicz. ** You will already be answering their questions a and b, during your work on all the 5 Criterion. THEN, use the following probabilities to calculate the EMV, EOL, and EVPI: 30% strong market, 50% fair market, and 20% poor market.
Pg 101 Problem 3-30 (MUST USE MICROSOFT EXCEL FOR THIS PROBLEM).
USE THIS CHART to again practice the 5 Criterion for Making Decisions under Uncertainty ……….. same directions as above………. practice all 5 methods (MORE FORMULAS RESULT IN MORE POINTS FOR THIS PROBLEM… SEE EXAMPLE ATTACHED), highlight the best alternative for each criteria. This time, use .8 alpha for Hurwicz. **Do NOT specifically answer individual questions …………. as before, you are answering by marking which criteria you are using and highlighting your answer for each of the 5 methods. THEN, use the following probabilities to calculate the EMV, EOL, and EVPI: 40% strong market, 30% fair market, and 30% poor market.
Pg (see attached file) Construct a decision tree from the attached Real Estate story, determine the EMV, and select the best alternative just like the basic decision tree example (this problem DOES NOT include market research… which is the second example. The first alternatives here are the decision choices)
Pg (attached file) Construct a decision tree from the attached Jo-Jo, Inc. story, determine the EMV, and select the best alternative just like the basic decision tree example. (this problem DOES NOT include market research… which is the second example. The first alternatives here are the decision choices)
(OPTIONAL, BUT GOOD PRACTICE) Page 102 Problem 3-36 and 3-37 3-36) Construct a basic decision tree based upon this problem and determine which course of action the medical professionals should take ie no market research included; THEN 3-37) expand this tree by adding the market research ie as the first decision node (see book example Figure 3.4 page 79). Future probabilities have been provided here in the book. **No need to answer their specific questions, although my directions will answer some of theirs. NOTE: DON’T FORGET TO DEDUCT THE COST OF THE MARKET RESEARCH FROM YOUR PAYOFFS.
