Decisin Analysis - Tutorial 1

Question 1

When calculating the Maximax and Maximin, how is it calculated from he payoff table?

Answer 1

By working SIDEWAYS and finding the highest/lowest respectively for each decision choice

Question 2

When calculating the minimax regret what is the first thing to note at the bottom of the table?

Answer 2

The max event (the best scenario in that column)

Question 3

Once the max event has been calculated in the minimax regret table, what happen to the other number within the table?

Answer 3

They’re subtracted from the max event.

Max event - Alternative outcome

Question 4

Once the max event and values within the table have been calculated for Maximax regret, how are the final values established?

Answer 4

By working SIDEWAYS through each row and identifying the Maximum regret.

The lowest of these values is the minimum regret and stipulates what choice should be made

Question 5

Is Maximax a high or low risk decision criterium?

Answer 5

A high risk choice. It only works best if everything goes well

Question 6

When calculating the value of information given a market researchers history, what is the first step?

Answer 6

To calculate how many occasions they would have been correct out of 100.

For example: given an expected high demand of 0.3 and a high demand/positive correlation of 0.75 the calculation would be:

0.75 x 30 =22.5 cases