Once QBA 362 final exam is done, it will be time to reward Professor Hong with a well-deserved vacation. As a state employee, professor Hong hasn’t seen a raise since... well, ever. Thus, an important...

1. 
   

   Once QBA 362 final exam is done, it will be time to reward Professor Hong with a well-deserved vacation. As a state employee, professor Hong hasn’t seen a raise since... well, ever.
   Thus, an important criterion, in fact the most important criterion is to find an exotic
   region that can be visited inexpensively. There are three states of nature that could

   
   

   impact costs in these five areas of interest. Professor Hong has determined the average cost per day to visit each region under each of the possible states of nature. This table, which should not be construed as actual vacation advice, appears below. (Remember they are costs. Lower is better. For example, the most optimistic case is the one with lowest cost.)

   
   

(1) Use maximax, maximin, minimax regret, Hurwitz (alpha = 0.3), and equally likely methods to come up with a vacation place for Professor Hong. Show all your work and include your regret table.

(2) An optimistic vacationer would opt for: A) Scandinavia.
B) Galapagos Islands.
C) Australia.

D) Eastern Europe.

(3) ) A pessimistic vacationer would opt for: A) Scandinavia.
B) Galapagos Islands.
C) Australia.

Name: ________________

5.

D) Eastern Europe.

(4) After staring blankly at the options for several hours, the Hong family decides they truly have no idea which value of the dollar would be more likely and overall feel neither optimistic nor pessimistic (what is the alpha?). What's the safest choice for them to make?

A) Scandinavia
B) Australia
C) Galapagos Islands D) Eastern Europe

(5) What is the vacation of choice under the minimax regret criterion? A) Galapagos Islands
B) Eastern Europe
C) Southeast Asia

D) Australia

(6) If the probabilities of strong, middling, and weak dollar are 0.2, 0.3, and 0.5 respectively, what is the decision for this situation if Hong uses expected values?

(7) If the probabilities of strong, middling, and weak dollar are 0.2, 0.3, and 0.5 respectively, what is the EVPI for this situation?