Consider the following two (events or) states of nature (E, F) and the following available (decisions or) actions (Buy at A, Buy at B, Buy both A and B, Buy none, Buy at C, Buy at D), and consider their payoff matrix. E and F can be regarded as mutually exclusive and exhaustive events - i.e., exactly one of them will occur. E FBuy at A 15 -6Buy at B -8 18Buy both A and B 7 12Buy none 0 0Buy C -10 -7Buy D -11 -8Answer the following questions, and show all working at all stages in every question.Give answers to at least 3 significant figures and at least 2 decimal places.[Fill in the blank] Using the maximin strategy, what is the appropriate action and resultant payoff?[Fill in the blank] Using the minimax regret strategy, what is the appropriate action and resultant regret?[Fill in the blank] Consider the probability of event E being 0.75 = 75%.What is the expected monetary value (EMV) and the associated action?[Fill in the blank] What is the expected opportunity loss (EOL) and the associated action?[Fill in the blank] What is the expected value of perfect information (EVPI)?[Fill in the blank]

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Restating the problem and options: - We have two states of nature E and F (mutually exclusive and exhaustive), and six possible actions: Buy at A, Buy at B, Buy both A and B, Buy none, Buy at C, Buy at D. - Payoff matrix (E, F): Buy at A: E=15, F=-6 Buy at B: E=-8, F=18 Buy both A and B: E=7, F=12 Buy none: E=0, F=0 Buy C: E=-10, F=-7 Buy D: E=-11, F=-8 - Questions to answer (with at least 3 significant figures and 2 decimal places): 1) Using maximin strategy, what is the appropriate action and resultant payoff? 2) Using minimax regret strategy, what is the appropriate action and resultant regret? 3) If P(E)=0.75, what is the EMV and the associated action? 4) What is the EOL and the associated action? 5) What is the EVPI? Analysis of each option/approach: Option A: Buy at A - Maximin viewpoint: For each action, consider the worst payoff across states, then choose the action with the highest such worst payoff. Worst payoff for Buy at A is min(15, -6) = -6. Compare across actions: Buy at B has min(-8, 18) = -8; Buy both A and B has min(7, 12) = 7; Buy none has min(0, 0) = 0; Buy C has min(-10, -7) = -10; Buy D ha......Login to view full explanation

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