Use the expected value criterion to select the best alternative. Assume that the probability of S2 is equal to 0.4
What will be an ideal response?
Answer:
EV (Alt 1) = 0.6(10) + 0.4(2) = 6.8
EV (Alt 2) = 0.6(-2) + 0.4(8) = 2.0
EV (Alt 3) = 0.6(8) + 0.4(5) = 6.8
Select either alternative 1 or 3.
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