THE GOAL IS TO MAXIMIZE A. SOLVE THE TREE BY THE EXPECTED VALUE CRITERION. B. EX
ID: 329784 • Letter: T
Question
THE GOAL IS TO MAXIMIZE
A. SOLVE THE TREE BY THE EXPECTED VALUE CRITERION.
B. EXPLAIN THE BEST POLICY BY THE EXPECTED VALUE CRITERION.
C. SOLVE THE TREE BY THE OPTIMISTIC CRITERION
D. EXPLAIN THE BEST POLICY FOR THE OPTIMISTIC CRITERION
I HAVE FINISHED THE EXPECTED VALUE CRITERION AND I STARTED THE OPTIMISTIC CRITERION. fOR THE OPTIMISTIC CRITERION, I NEED TO WRITE IT ABOVE THE EXPECTED CRITERION, AS YOU CAN SEE WHERE I STARTED IT.
60 0o 40 20 oO 30 Co o 54 L 5? 70 o8 ID oliy forth e xpeuted value is to choose B Los 80 |Explanation / Answer
A) Solution by Expected Value approach
Expected Value (EV) of node D = 0.6*60+0.4*40 = 52
Max EV of D, E = Max(52,50) = 52 (of D)
EV of node F = 0.6*80+0.4*30 = 60
EV of node A = 0.8*52 + 0.2*60 = 53.6
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EV of node G = 0.7*60+0.3*40 = 54
EV of node H = 0.7*70+0.3*10 = 52
Max EV of G, H = Max(54,52) = 54 (of G)
EV of node K = 0.8*80 + 0.2*20 = 68
Max EV of J, K = Max(70, 68) = 70 (of J)
EV of C = 0.8*54 + 0.2*70 = 57.2
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B) Out of A, B and C, EV of B is the maximum (Max of 53.6, 60 and 57.2)
Therefore, as per EV approach, the best decision is C.
C) As per Optimistic criterion, the decision maker only considers the best outcome.
Max Payoff of D = Max(60,40) = 60
Max out of D and E = Max (60,50) = 60
Max Payoff of F = Max(80,30) = 80
Max payoff of A = Max(60,80) = 80
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Max Payoff of G = Max(60,40) = 60
Max Payoff of H = Max(70,10) = 70
Max out of G and H = Max (60,70) = 70
Max Payoff of K = Max(80,20) = 80
Max payoff of C = Max(60,70,70,80) = 80
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D) As per optimistic approach, the best policy is either of A and C.
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