Welcome to your Decision Theory

1. 
Which Decision making model can be used when the decision maker knows the Probability of occurance of each outcome?

2. 
Which Decision making model can be used when the decision maker does not know the Probability of occurance of each outcome?

3. 
Following are the steps in the Decision making process (True / False)

  1. Defining or diagnosing the problem
  2. Fact gathering
  3. list all possible solutions
  4. Evaluate alternatives
  5. Select the best alternative
  6. Implement the selected decision

4. 
Maximax criteria and maximin criteria are used in which type of decision making?

5. 
Which of the following criteria assumes the following: "If we don't know of any reason for any one event to occur more than the other, we should assume that all events have an equal chance of occurrence or all events have the same probability":

6. 
A newspaper boy buys his newspaper for Re 0.2 each and sells it for Re 0.4 each. Any paper not sold by the end of the day becomes useless for him. His problem is to determine the optimum number of papers that he should buy. If he stocks more, his profits are reduced to the extent of cost of unsold newspapers, and if he stocks less, he loses the opportunity to earn more profits. An analysis of past records shows the probability distribution of demand of newspapers as given below:

Demand: 0 10 20 30 40
Probability: 0.2 0.25 0.4 0.1 0.05
Find the optimum number of newspapers he should stock.