Decision Making under risk and uncertainty Flashcards
1
Q
Optimistic Approach
A
Take Best payoff of each Di
then choose best payoff from the remaining
2
Q
Conservative Approach
A
Take Worst payoff of each Di
then choose best payoff from the remaining
3
Q
Minimax Regret
A
Make Regret table (take best payoff of each state of nature, and find the difference)
take the least Regret of each Di and choose the least regret of the remaining
4
Q
EV Approach
A
P(Si) x payoff
add across for each Di
choose best EV
5
Q
EVPI
A
take the best payoff of each Si and times respective P(Si) = EVwPI
EVPI = | EV - EVwPI |
6
Q
EVSI
A
take best EV of each Di and times the P(survey) = EVwSI
EVSI = | EV - EVwSI |
7
Q
Efficiency of Survey
A
EVSI/EVPI
8
Q
Bayes’ Theorem
A
P(A) = sum of all P(AnSi) if collectively exhaustive & mutually exhaustive P(A|B) = P(AnB)/P(B) = [P(B|A) x P(A)]/[P(B|A) x P(A) + P(B|A') x P(A')]
