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140 Decision making under uncertainty
After further questioning he is also able to say that he is
indifferent between options C and D below:
C: A production run which will certainly yield a profit of $0 but
which is also certain to disappoint no customers.
D: A production run which will have a 0.6 probability of a
profit of $40 000 with no customers disappointed and a 0.4
probability of a profit of $0 with 5000 customers disappointed.
(i) Determine whether the manufacturer should choose the
large- or small-scale production run in order to maximize
his expected utility.
(ii) Interpret the expected utilities which you obtained in
part (i).
(d) Would the Simple Multi-attribute Rating Technique (SMART)
have offered a better way of tackling the pottery manufacturer’s
problem?
References
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in the Electronic Circuit of a Cardiac Pacemaker: A Decision Analysis,
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Ellis Horwood, Chichester.
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andK.R.Hammond(eds)Judgment and Decision Making, Cambridge University
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