ManSci_Decision Analysis

The decision maker can control states of nature.

• True

• False

The difference in decision making under risk and decision making under uncertainty is that under risk, we think we know the probabilities of the states of nature, while under uncertainty we do not know the probabilities of the states of nature.

• True

• False

EVPI (Expected Value of Perfect Information) is a measure of the maximum value of additional information.

• True

• False

The several criteria (maximax, maximin, equally likely, criterion of realism, minimax regret) used for decision making under uncertainty may lead to the choice of different alternatives.

• True

• False

The maximax decision criterion is used by pessimistic decision makers and maximizes the maximum outcome for every alternative.

• True

• False

Answer explanation

optimistic

The maximin decision criterion is used by pessimistic decision makers and minimizes the maximum outcome for every alternative.

• True

• False

Answer explanation

The worst or minimum payoff for each alternative is considered and the alternative with the best (maximum) payoff

A decision table is sometimes called a payout table.

• True

• False

Answer explanation

payoff

The nodes on decision trees represent either decisions or states of nature.

• True

• False

Answer explanation

Any problem that can be presented in a decision table can also be graphically portrayed in a decision tree.

• True

• False

Answer explanation

The criterion of realism is also called the Laplace criterion. 

• True

• False

Answer explanation

Criterion of Realism or the Hurwicz Criterion