University of Tunis Tunis Business School Fall 2022 Decision & Game Theory Midterm Exam Question 1 (20 points) Consider the following decision profit table, where x is a real number. EI E2, AL x 3 Az 3 2 AR 5 T Find which decision will be taken as a function of x according to : 1. Optimistic approach. 2. Hunwicz criterion for an optimism index 0.5, ‘Question 2 (50 points) to raise funds for a new athletic TBS is considering whether to hold an extensive cam field. The response to the campaign depends heavily uy f the football ‘com 19 the past, the football team has had ‘wining on pret fhe inet the football team has a winning season (W) this fall, then many of the alumni will contribute and the campaign will rais e 3 se ion million T! im has a losing season (L), few will contribute and the campaign wil TD. If, i undaen oa incurred, Before the football season begins, TBS needs to make its decision about whether to hold the campaign next year. A famous football expert, has offered his services for to help evaluate whether the team 15% reliable, determine the optimal will have a winning season. Given that the expert judgment is only strategy that should be adopted by TBS. Question 3 (30 points) A dealer can buy a special piece of art today for 40,000 TD or can wait a day and buy the piece tomorrow is (if it has not been sold) for 30,000 TD. The dealer may also wait another day and buy the piece (i still available) for 26,000. At the end of the third day, the piece will no longer be available for sale. Each day, there is a 0.60 probability that it will be sold. Below, the structure of the corresponding decision tree is given. Sold (06) Sold (0.6) Available (0.4) Available (04) Given that a client is willing to buy the piece o' 1. complete the decision tree and help the dealer to choose the best strategy. . 2. how much the dealer is willing to pay to acquire perfect information about the availability of the piece of art the second day. Scanné avec CamScannerRépublique Tunisienne Ministére de L’Enseign rie Hi Perea inistére de L’Enscignement Supérieur ¥ é aN 55, de La Recherche Scientifique if % ‘ais Université De Tunis ‘ Unigidady Institut Supérieur des Affaires de Tunis Unga een aig SUEY all gaat Fall 2022 Decision & Game Theory Final Exam (Duration 2hr) ‘Thought Question (30 points) 1. Answer by true or false 'b. The expected value of sample information can never be less than the expected value of perfect information e ‘Using the optimistic and the pessimistic approaches will never give the same optimal decision. 2. What is the Von Neumann-Morgenstem’s Axiom of Independence? 3. The following game gives player 1’s payoff. Determine the values of p and q that will make strategies (2,B) a saddle point. ATSB 2 T 2 3 6 713 4. Medical studies have shown that 10 our of 100 adults have heart disease. When a person with heart disease is given an EKG test, a 0.9 probability exists thatthe test will indicate the presence of heart disease. When a person without heart disease is given an EKG test, a0.95 probability exists thatthe test will indicate the person does not have heart disease. Suppose that a person arrives at an emergency room complaining of chest pains. An EKG is given and indicates that the person bas heart disease. What is the probability that the person actually has heart disease? Question 1 (20 points) 7 A car dealer has to decide whether to purchase an insurance policy to cover possible hail damage to his inventory of cars. He estimates the potential damage (in thousand’ TD) from hail in the next year as follows: ‘The dealer is considering the following three alternatives for dealing with this risk: Hail Damage | 0 Probability 15 0.08 30, 0.10 B 03 ‘+ Al: buy an insurance policy for 47,000 TD that would cover 100% of any losses that may occur. ‘+ A2:buy an insurance policy for 25,000 TD that would cover all losses in excess of 35,000 TD. © A3:Not to pay any insurance premium, Scanne avec CamScanner1. Construct the payoff matrix for this problem. 2, What decision should be made according to the Savage rule? Question 2 (15 points) Rym is trying to determine which of two courses to take. If she takes the operations research course, she believes that she has a 10% chance of receiving an A, a 40% chance for a B, and a 50% chance for aC. If Rym takes a statistics course, she has a 70% chance for a B, a 25% chance for a C, and a 5% chance for a D. Rymis indifferent between L; and L2 and she is also indifferent between Ls and Ls. Which course should she take? 1 0.25 4 Lim C om la D 0.70, AS L— s & 4 0.30 p Question 3 (35 points) ‘Ahmed, who travels frequently between Sfax and Tunis, has two routes options Route A and route B. The highway patrol has a limited police force. Ifthe full force is allocated to either route, Ahmed, with hég passionate desire for driving “superfast”, is certain to receive a 60 TD speeding ticket. If the force is split 50-50 between the two routes, there is a 50% chance he will get 42D TD ticket on route A and only a 30% chance that he will get the same fine on route B, Use game theory to determine the expected fine paid by Ahmed. — Scanné avec CamScanner