Question

   7. The director of career advising at Rutgers want to use decision analysis to provide information to help students decide which degree program they should pursue. The director has set up the following payoff table for 6 of the most popular and successful degree programs at RU that shows the estimated (projected) 5-year gross income that an average student graduating with each degree for 4 future economic conditions can expect:

		Economic	Conditions
Degree Program	Recession	Average	Good	Robust
Nursing	115000	155000	190000	180000
Law	140000	175000	200000	220000
Finance	95000	150000	180000	250000
Computer Programming	120000	140000	150000	170000
Information Systems	85000	120000	150000	180000
Music and Theater	60000	80000	100000	100000

Determine the best degree program (a decision under uncertainty) in terms of the projected income, using the following decision criteria:

• Maximax
• Maximin
• Equal Likelihood
• Minimax Regret
• Hurwicz with α = .25

If further it has been determined that the probability of each future economic condition is given by:

p(recession)=.45, p(average)=.35, p(good)=.15, p(robust)=.05.   

Use expected value to determine the best degree program (a decision under risk presuming equally likely futures) in terms of projected income. If you were the director of career advising which degree program would you recommend (in particular, do you agree with optimizing the expected payoff or some other criteria)?

Answer 1

1. Maximax criteria is choosing the maximum of maximum output under each alternatives

which is Max of

190000

220000

250000

170000

180000

100000

= 250000, which corresponds to  Finance

2.Maximin criteria chooses maximum of minimum output under each alternative which is

Max

115000

140000

95000

120000

85000

60000

=140000, which corresponds to Law.

3. Equal likelihood means the best average out of all options

which is

max

160000

183750

168750

145000

133750

85000

which is 183750, which corresponds to Law.

4. Minimax regret is choosing the minimum of maximum regret value.

Regret table

Degree Program	Recession	Average	Good	Robust
Nursing	25000	20000	10000	70000
Law	0	0	0	30000
Finance	45000	25000	20000	0
Computer Programming	20000	35000	50000	80000
Information Systems	55000	55000	50000	70000
Music and Theater	80000	95000	100000	150000

Minimax regret =

Min

70000

30000

45000

80000

70000

150000

which is 30000 which corresponds with Law.

Note: As per policies, I can answer first 4 parts of a problem. Inconvenience is regretted.