文档介绍：An Introduction to Decision Making
Chapter 20
1
GOALS
Define the terms state of nature, event, decision alternativser stock would more than double, to $2,400. However, if there were a bear market (., stock prices declined), the value of his Kayser stock could conceivably drop to $1,000 by the end of the year. His predictions regarding the value of his $1,100 investment for the three stocks for a bull market and for a bear market are shown below. A study of historical records revealed that during the past 10 years stock market prices increased six times and declined only four times. According to this information, the probability of a market rise is .60 and the probability of a market decline is .40.
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EMV- Example
(A1)=(.6)($2,400)+(.4)($1,000) =$1,840
(A2)=(.6)($2,400)+(.4)($1,000) =$1,760
(A3)=(.6)($2,400)+(.4)($1,000) =$1,600
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Opportunity Loss
Opportunity Loss or Regret is the loss because the exact state of nature is not known at the time a decision is made.
The opportunity loss is computed by taking the difference between the optimal decision for each state of nature and the other decision alternatives.
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Expected Opportunity Loss
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Opportunity Loss - Example
Opportunity Loss when Market Declines
Kayser:
$1,150 - $1,000= $150
Rim Homes:
$1,150 - $1,100 = $50
Texas Electronics:
$1,150 - $1,150 = $0
Opportunity Loss when Market Rises
Kayser:
$2,400 - $2,400= $0
Rim Homes:
$2,400 - $2,200 = $200
Texas Electronics:
$2,400 - $1,900 = $500
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Expected Opportunity Loss
(A1)=(.6)($0)+(.4)($150) =$60
(A2)=(.6)($200)+(.4)($50) =$140
(A3)=(.6)($500)+(.4)($0) =$300
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Maximin, Maximax, and Minimax Regret Strategies
Maximin
1,000
1,100
1,150
Maximax
2,400
2,200
1,900
Minimax
Regret
150
200
500
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Maximin, Maximax, and Minimax Regret Strategies
Maximin strategy maximizes the minimum gain. It is a pessimistic strategy.
Maximax strategy maximizes the maximum gain. Opposite of a maximin approach, it is an optimistic strategy
Minimax regre