Assignment Choice under Risk
Last Updated on 28. April 2023 by Martin Schuster
Task
What alternative should you select if the following pay-off and likelihood information is given?
| S1 | S2 | S3 | S4 | |
| Probability | 0.1 | 0.4 | 0.3 | 0.2 |
| A1 | 10 | 10 | 5 | 8 |
| A2 | 9 | 10 | 12 | 8 |
| A3 | 15 | 3 | 2 | -2 |
| A4 | 14 | 4 | 3 | 0 |
Solution
| Alternative | Expected Pay-Off |
| A1 | 8.1 |
| A2 | 10.1 |
| A3 | 2.9 |
| A4 | 3.9 |
A2 has the highest expected pay-off and should be selected.
