Which choice is the decision maker’s maxi-min decision?
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7.
Question 7
For this question, consider the following decision problem. A decision maker must choose one of three actions: A, B, or C. The outcome of each action is uncertain, as follows.
- If action A is chosen, there are two possible outcomes. With probability 0.2 the reward is 100, and with probability 0.8 the reward is 400.
- If action B is chosen, there are three possible outcomes. With probability 0.25 the reward is 200, with probability 0.5 the reward is 250, and with probability 0.25 the reward is 300.
- If action C is chosen, there are two possible outcomes. With probability 0.8 the reward is 0, and with probability 0.2 the reward is 500.
To answer questions 7-10, below, draw and then analyze a decision tree that corresponds to the decision-maker’s problem, above.
Which choice is the decision maker’s maxi-min decision?
1 point