Question

Hillsdale College has sold out all tickets for a jazz concert to be held in the stadium. If it​ rains, the show will have to be moved to the​ gym, which has a much smaller capacity. The dean must decide in advance whether to set up the seats and the stage in the gym or in the​ stadium, or​ both, just in case. The payoff matrix below shows the net profit in each case.

States of Nature

Rain

No Rain

Set Up in Stadium

left bracket Start 3 By 2 Matrix 1st Row 1st Column $ minus 1200 2nd Column $ 2100 2nd Row 1st Column $ 950 2nd Column $ 1040 3rd Row 1st Column $ 900 2nd Column $ 1150 EndMatrix right bracket

$−1200	$2100
$950	$1040
$900	$1150

Strategies

Set Up in Gym

Set Up in Both

If the weather forecaster predicts rain with a probability of

0.70.7​,

what strategy should the dean choose to maximize expected​ profit?  

A.

Set Up in Stadium

B.

Set Up in Gym

C.

Set Up in Both

What is the maximum expected​ profit?  

​$nothing

Answer 1

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