True/False
1. States of nature are alternatives available to the decision maker.
2. Prior probabilities refer to the relative likelihood of possible states of nature.
3. A decision tree branches out all of the possible decisions and all of the possible events.
4. Payoff tables may include only non-negative numbers.
5. The maximax approach is an optimistic strategy.
6. Sensitivity analysis may be useful in decision analysis since prior probabilities may be inaccurate.
7. The EVPI indicates an upper limit in the amount a decision-maker should be willing to spend to obtain information.
8. The maximum likelihood criterion ignores the payoffs for states of nature other than the most likely one.
9. Which of the following is not a criterion for decision making?
a. Maximin
b. Bayes' decision rule
c. EVPI
d. Maximax
e. Maximum likelihood
10. Determining the worst payoff for each alternative and choosing the alternative with the “best worst” is the criterion called:
a. Minimin
b. Maximax
c. Bayes' decision rule
d. Maximin
e. Maximum likelihood