[Get Answer ]-Quantative Methods Help

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Question Description

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In your own words, explain how to obtain the “expected value ofperfect information” for any payoff table, which has probabilities associatedwith each state of nature. Then, provide an example, drawing from any of thepayoff tables in Problems 1-17 in the back of Chapter 12. If no probabilitiesare given for the states of nature, then assume equal likelihood.

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Problem:

A local real estate investor in Orlando is considering threealternative investments: a motel, a restaurant, or a theater. Profits from themotel or restaurant will be affected by the availability of gasoline and thenumber of tourists; profits from the theater will be relatively stable underany conditions. The following payoff table shows the profit or loss that couldresult from each investment

Gasoline Availability

Investment

Shortage

Stable Supply

Surplus

Motel

$-8,000

$15,000

$20,000

Restaurant

$2,000

$8,000

$6,000

Theater

$6,000

$6,000

$6,000

Determine the best investment, using the following decisioncriteria.

  1. Maximax

  2. Maximin

  3. Mininmax regret

  4. Hurwicz (a=4)

  5. likelihood

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