Probability of rising consumer confidence

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1. Advertising strategies decisions. For the payoff table in Exercise 17, find the action with the highest expected value.

a) If forecasters think the probability of rising consumer confidence is 0.70, what is its expected value?

b) What action would have the highest expected value if they think the probability of rising consumer confidence is only 0.40?

2. Energy investment decisions.

a) For the payoff table in Exercise 18, find the investment strategy under the assumption that the probability that the price of oil goes substantially higher is 0.4 and that the probability that it goes substantially lower is 0.2.

b) What if those two probabilities are reversed?

Reference no: EM131007992

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