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PAYOFF TABLE EXERCISE SET 1

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					                          PAYOFF TABLE EXERCISE SET 1



If a company decides to locate in Conway and there is a recession in the US, it stands to
gain $1,000,000; however if there is a boom in the US, it will garner $6,000,000. On the
other hand, if it locates in Juarez and there is a recession in the US, it stands to take in
$7,000,000, but if there is a boom in the US, it will forego a fine opportunity and take in
only $2,000,000. If the status quo continues, the payoff for Conway will be $5,000,000
and for Juarez, $1,000,000.

1. SUM
           a. Make a payoff table in Excel as shown for this decision problem using just
              regular payoffs and the sum technique.

           b. State which location should be chosen.

2. MEDIAN
        a. Make a payoff table in Excel as shown for this decision problem using just
           regular payoffs and the MEDIAN technique.

           b. State which location should be chosen.

3. PROBABILISTIC SUM (Suppose the probability of a recession is .2, of a boom .3,
   and the status quo.5)
          a. Make a payoff table in Excel as shown for this decision problem using
               PROBABILISTIC payoffs and the sum technique.

           b. State which location should be chosen.

4. PROBABILISTIC MEDIAN (Suppose the probability of a recession is .2, of a boom
   .3, and the status quo .5)
           a. Make a payoff table in Excel as shown for this decision problem using
               PROBABILISTIC payoffs and the MEDIAN technique.

           b. State which location should be chosen.

5. Could the results in #1 be different if we used averages instead of sums?

				
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