Marc Champeaux, the owner of Green Mountain Organic Farm, has to decide which crop to plant on his 100 acre farm in St. Albans, Vermont. The yield of each crop is dependent on the amount of rainfall during the growing season. Based on his past experience, he estimates the following profit/loss payoff table:
states of nature(rainfall forest)
decision alternatives high(s1) average(s2) low(s3)
Crop A, d1 14,000 -15000 8000
Crop B, d2 -12000 18000 10000
Crop C, d3 21000 16000 -6000
If nothing is known about the demand probabilities, A. Using the Conservative Approach, specify the best decision alternative. B Using the Minimax Regret Approach, create an EOL (Expected Opportunity Loss) Table and specify the best decision alternative.
Suppose the probabilities for High, Average, & Low rainfall are 40%, 20%, and 40% respectively. c. Construct a Decision Tree. (Please use MS Word, MS Excel Drawing Tools, etc. If you draw it by hand, please draw neatly using a ruler.) Solve the decision tree. What is the recommended decision? d. Calculate the Expected Value of Perfect Information (EVPI).