Help me study for my Management class. I’m stuck and don’t understand.
Probabilities are normally used in decision making under risk. You are involved in a decision making process that involves three decision alternatives and three states of nature. Discuss the methods you will use to assign probabilities to the states of nature. What conditions must be satisfied for the probabilities to exist and also how would you use the probabilities to make informed decisions? If you need to improve your decision making process for this problem, what would you have to do? And how would you be sure that this effort is worthwhile. After the discussion forum, develop a two-page report detailing your approach to this problem as stated. The report should be typed double-spaced.
In addition to your two page report, solve the problem below to show how you have applied the concepts you have outlined in your report.
Lawson’s Department Store faces a buying decision for a seasonal product for which demand can be high, medium, or low. The purchaser for Lawson’s can order one, two, or three lots of the product before the season begins but cannot reorder later. Profit projections (in thousands of dollars) are shown.
P(E) = 0.70 P(s1/E) = 0.34 P(s1/V) = 0.20
P(V) = 0.30 P(s2/E) = 0.32 P(s2/V) = 0.26
P(s3/E) = 0.34 P(s3/V) = 0.54
What is the optimal decision strategy?
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