Business Statistics

742 Business Statistics

For act A

4

, expected opportunity loss (EOL) is

[(0.10 × 3000 + 0.15 × 2000 + 0.20 × 1000 + 0.25 × 0 + 0.30 × 1000) = 1100]

For act A

5

, expected opportunity loss (EOL) is

[(0.10 × 4000 + 0.15 × 3000 + 0.20 × 2000 + 0.25 × 1000 + 0.30 × 0) = 1500]

As discussed, a decision maker will select the strategy which will minimize

the expected opportunity loss (EOL). It can be seen that for act A

4

, expected

opportunity loss is 1100. Hence, a decision maker will select strategy A

4

. From

Examples 19.2 and 19.4, it can be seen that the optimal decision using both the

approaches, that is, expected monetary values (EMV) and expected opportunity ...