II. Payoff table

Given the payoff table listed below, please answer:

State of Nature

# 1

#2

#3

#4

1

0

1

6

1

5

4

2

3

2

2

3

(a).If somehow you find out for certain that state of nature #4 is going to occur, which alternative will

you select?

Alternative

A

B

с

(b). If you are uncertain which state of nature will occur, and use the maximin criterion, which

alternative will you select?

(c). If you are uncertain which state of nature will occur, and use the maximax criterion, which

alternative will you select?

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(d). If you are uncertain which state of nature will occur, and use the Laplace criterion, which alternative

will you select?

(e). If you feel that P(#1)=0.4, P(#2)=0.3, P(#3)=0.2, and P(#4)=0.1, which alternative will you select?

What is your expected payoff under risk? What is your expected value of perfect information?