Answer:
A.
Under the MaxiMax criteria, the best of the maximum payoffs of all the alternatives will be selected.
Maximum payoff under large stock = $22000
Maximum payoff under medium stock = $14000
Maximum payoff under small stock = $9000
The , best of above payoff is $22000, so large stock alternative will be selected.
B.
Under the MaxiMin criteria, the best of the minimum payoffs of all the alternatives will be selected.
Minimum payoff under large stock = -$2000
Minimum payoff under medium stock =$6000
Minimum payoff under small stock =$4000
The , best of the above payoffs is $6000, so medium stock alternative will be selected.
C.
Under equally likely criteria,
Expected payoff under the large stock = (22000 + 12000 -2000)/3 = $10666.67
Expected payoff under the medium stock = (14000 + 10000+6000)/3 = $10000
Expected payoff under the small stock = (9000+8000+4000)/3 = $7000
The maximum payoff is with the large stock alternative, then large stock alternative is selected.
D.
With the given probabilities,
Expected payoff under the large stock = (.3*22000 + .5*12000 -.2*2000) = $12200
Expected payoff under the medium stock = (.3*14000 + .5*10000+ .2*6000) = $10400
Expected payoff under the small stock = (.3*9000 + .5*8000 + .2*4000) = $7500
The maximum payoff is with the large stock alternative, then large stock alternative is selected.
E.
EVPI = EVWPI - EVWOPI
EVPI = (.3*22000 + .5*12000 + .2*6000) - 12200
EVPI = $1600
