Steve’s Mountain Bicycle Shop is considering three options for its facility next year. Steve can expand his current shop, move t
o a larger facility, or make no change. With a good market, the annual payoff would be $76,000 if he expands,
$90,000 if he moves, and $40,000 if he does nothing. With an average market, his payoffs will be $30,000, $41,000, and
$15,000, respectively. With a poor market, his payoff will be - $17,000, - $28,000, and $4,000, respectively.
(a) Which option should Steve choose if he uses the maximax criterion?
(b) Which option should Steve choose if he uses the maximin criterion?
(c) Which option should Steve choose if he uses the equally likely criterion?
(d) Which option should Steve choose if he uses the criterion of realism with = 0.4?
(e) Which option should Steve choose if he uses the minimax regret criterion?
$90,000 if he moves, and $40,000 if he does nothing. With an average market, his payoffs will be $30,000, $41,000, and
$15,000, respectively. With a poor market, his payoff will be - $17,000, - $28,000, and $4,000, respectively.
(a) Which option should Steve choose if he uses the maximax criterion?
(b) Which option should Steve choose if he uses the maximin criterion?
(c) Which option should Steve choose if he uses the equally likely criterion?
(d) Which option should Steve choose if he uses the criterion of realism with = 0.4?
(e) Which option should Steve choose if he uses the minimax regret criterion?
1 answer:
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Use the law of cosines:
We have:
substitute:
Answer:
When Mary raises the probability that she has a better hand is 0.273
Step-by-step explanation:
In the poker game it is given that the probability that Mary has a better hand than John is 0.04.
Let the event that Mary has a better hand than John be A.
Let the event that that Mary raises the stakes be B.
It is also given that if Mary has a better hand than John then she would raise with a probability of 0.9
Therefore p(B | A) = 0.9
If Mary has a poorer hand she will raise with a probability of 0.1
Therefore p(B | A') = 0.1
Given that Mary raises the probability that she has a better hand is given by
p(A | B)
=
= 0.273
So when Mary raises the probability that she has a better hand is 0.273