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Managerial Economics Module 7 Assignment

Managerial Economics Module 7 Assignment

Q 1. Analyze a decision with uncertain costs and benefits, using probability distributions. 2. Discuss how employee incentives can influence decision-making behavior. 3. Explain the costs and benefits of collecting more information to reduce uncertainty. 4. Recommend effective strategies for organizations facing uncertainty that cannot be quantified, or estimated.

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The risk degree can be determined objectively in certain situation. Subjectivity is involved in probability estimation of an event. Modeling of risk is the utilization of discrete distribution of probability to calculate expected variable value instead of estimate of point. Below is an example of a discrete distribution of probability of costs of construction of road: