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Hello Mr JM! Trust you are doing well! I am having a severe headache and maybe this part of the chapter is ruining my F5! Am talking about constructing a Pay Off table 🙁 Is there any specific way of doing so? How should be the axes be labelled? For say on the upper part is the Demand but what about the lower one? 2 decisions will give four possible outcome and 5 decisions will give 25? Please Help 🙂
You can produce the table in any format you like – it does not have to be the way I show it (although I think it is the easiest).
All that is necessary is to show all the possible profits that can result.
What you need to understand is that the resulting profit depends on what decision is made, and what happens to the uncertain factor (which in my example is the demand).
What you have written about 2 decisions giving 4 outcomes etc does not make sense.
If there are two choices to make and there are (say) three possible outcomes for each choice, then there will be 2 x 3 = 6 possible outcomes.
If there are three choices to make and there are (say) three possibly outcomes for each choice then there will be 3 x 3 = 9 possible outcomes.Have you watched my lecture, because I go through constructing the payoff table with an example.
Thank you JM! If on the upper part I put demand figure and lower one is choice (decisions, alternatives available), will that be ok?
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