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?