Analyze decisions and strategies using probability concepts in more complex settings.
Use conditional probabilities in an expected-value decision
Problem
High demand has probability \(0.65\). Alternative A pays \(\$900\) under high demand and \(-\$100\) otherwise; B pays \(\$500\) for certain. Compute both conditional expected payoffs and apply the maximum-EV criterion.
Big Picture
What this problem is really about
Once new information supplies state probabilities, use those same conditional probabilities for every alternative. Weight each alternative's payoff in every state, including losses, and compare the resulting expectations under the stated objective. Certainty may matter under another preference, but it cannot silently replace a maximum-expected-value rule when that is the requested criterion.
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