Question 2 

1. Use the Expected Value model to assess the risks for each strategy. Each strategy requires a sum of funds to be invested and as a result produces a different profit pay off. 

Assume the probabilities for each state are 30%, 50%, and 20% respectively: 

a) Using the concept of Expected Value (payoff table), what strategy should be adopted for making decisions under risk? 

Since the 32.6 is the highest value in the list of strategies therefore we s3

For the case of making decisions under complete uncertainty: 

b) If your organisation takes a pessimistic view, what strategy should be selected? 

In case of p v we select strategy 2 coz it gives us the least amount of risk.

c) If your organisation takes a sore looser attitude (minimising regret), what strategy should be selected? 

From the table we can see that 52 is the least value from the list of strategies hence we select 4.

d) What strategy should be selected if you apply the Laplace criterion? 

Show your workings and provide a short explanation for each of your answers Q2(a) to (d).