Subjects decision analysis

Decision Emv

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Decision Emv


1. **State the problem:** We are given three probabilities: $0.4$, $0.3$, and $0.3$. We have two alternatives $A1$ with payoffs $(40, 20, 0)$ and $A2$ with payoffs $(30, 30, 30)$. We want to find which decision is better using the Expected Monetary Value (EMV) criterion. 2. **Calculate EMV for $A1$:** $$\text{EMV}_{A1} = 0.4 \times 40 + 0.3 \times 20 + 0.3 \times 0$$ $$= 16 + 6 + 0 = 22$$ 3. **Calculate EMV for $A2$:** $$\text{EMV}_{A2} = 0.4 \times 30 + 0.3 \times 30 + 0.3 \times 30$$ $$= 12 + 9 + 9 = 30$$ 4. **Compare the EMVs and conclude:** Since $\text{EMV}_{A2} = 30$ is greater than $\text{EMV}_{A1} = 22$, decision $A2$ is better based on the EMV criterion. **Final answer:** $\boxed{A2}$