
Chapter 19
PB
Statistical Decision Theory
823
19.4.2 Expected Opportunity Loss (EOL)
Expected opportunity loss (EOL) criterion is another approach based on which a decision can be
taken. From Table 19.15, the expected opportunity loss (EOL) can be computed as below:
EOL
()
j
k
i
lp=
=
∑
1
where k is the number of possible state of nature, r the number of possible acts, l
ij
the opportunity
loss associated with ith act (S
i
) and jth state of nature (E
j
), and P
j
the probability of occurrence
of the state of nature j.
Example 19.4
Suppose in Example 19.1, the probability of occurrence of various states of nature are also
provided as indicated in Table 19.16. ...