Explain decision making by means of expected payoff.
Nick has strategies to open some pizza restaurants however he is not sure how many to open. He has prepared a payoff table to help analyze the situation.
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States of Nature
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Market
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Alternative
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GOOD
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FAIR
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POOR
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Open 1
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380,000
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70,000
|
-400,000
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|
Open 2
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200,000
|
80,000
|
-200,000
|
|
Do Nothing
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0
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0
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0
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As Nick doesn't know how his received he assumes that all three states of nature are equally likely to occur. If he utilizes the equally likely criterion what decision would he make?