Back to: Chapter 4: Decision Analysis

2 thoughts on “1 | Setup (Preview)

  1. Hi Jason,

    How do we know in this question that 190 and 93 represent profits.
    Secondly, do we always assume that S1 is high and S2 is low.

    Thank a lot

    1. How do we know in this question that 190 and 93 represent profits.

      They begin (as stated in the question) as revenues, and since we are also given a column with costs we can use the formula:

      Profit = Revenue – Cost

      …to convert the table to profits.

      …do we always assume that S1 is high and S2 is low?

      No. It is more conventional to name the state of nature in the first column as ‘S1’ and then ‘S2’ for the second column – but this convention does not need to be followed for marks.

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