Question

Dr. McFadden, a surgeon, must decide what mode of treatment to use on Mr. Samuels. There are three modes of treatment: Mode A, B, and C; and three possible states of nature: 1. Treatment succeeds, and patient leads a normal life, 2. Patient survives treatment but is permanently disabled, and 3. Patient fails to survive treatment. The probability of that the patient leads a normal life is 0.4, Disability is 0.4 and Non-survival is 0.2. Dr. McFadden has prepared the decision table below. What mode of treatment maximizes the expected value?

Treatment Mode	Outcome
	Normal Life	Disability	Non-Survival
A	$1,000,000	-$2,000,000	-$500,000
B	$3,000,000	-$2,500,000	-$500,000
C	$4,000,000	-$3,000,000	-$600,000
P(outcome)	0.4	0.4	0.2

Answer 1