A manager has compiled estimated profits for various capacity alternatives but is reluctant to assign

QUESTION:

A manager has compiled estimated profits for various capacity alternatives but is reluctant to assign probabilities to the states of nature.

The payoff table is as follows:

a. Plot the expected- value lines on a graph.

b. Is there any alternative that would never be appropriate in terms of maximizing expected profit?

Explain on the basis of your graph.

c. For what range of P(2) would alternative A be the best choice if the goal is to maximize expected profit?

d. For what range of P(1) would alternative A be the best choice if the goal is to maximize expected profit?


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