QUANTITATIVE TECHNIQUE FOR

MANAGER.
(KMBN -206)

AMAN KUMAR SINGH

MBA 2nd SEM
SEC-A
ROLL NO-27
INDIVIDUAL ASSIGNMENT

“PAY OFF TABLE”

 INTRODUCTION
 A profittable (payoff table) can be a useful way to represent and
analyze a scenario where there is a range of possible outcomes and
a variety of possible responses.
 A payoff table simply illustrates all possible profits/losses and as
such is often used in decison making under uncertainty.
 PAYOFF TABLE
 A Payoff Table is a listing of all possible combinations of decision
alternatives and states of nature.
 The Expected Payoff or the Expected Monetary Value (EMV) is
the expected value for each decision.
 IMPORTANCE
 Two commonly used decision-making tools are payoff matrices and decision
trees. A payoff matrix specifies the probable value of different alternatives,
depending on different possible outcomes associated with each.
 A payoff table is a tool that provides information about the probability of various
outcomes--usually related to potential profit or loss. A decision tree also
provides some of the same type of information, but it's more informative in
terms of the consequences of actions or decisions.
 EXAMPLE
Example . If you make a unit product and it is sold and you gain Rs5. if you
make a unit and it is not sold you loose Rs3. Suppose the probability distribution
of the no. of units demanded is as follows :

No of units 0 1 2 3 4
Probability 0.20 0.20 0.25 0.30 0.05
 PAY-OFF TABLE
Supply (M) 0 1 2 3 4

0 0 0 0 0 0

1 -3 5 5 5 5

2 -6 2 -10 10 10

3 -9 -1 7 15 15

4 -12 --4 4 12 20
 UNIT WISE EXPECTED GAINS
Supply(m) Expected Gain
0 0(0.2)+0(0.2)+0(0.025)+0(0.03)+0(0.05)=0

1 -3(0.02)+5(0.2)+5(0.25)+5(0.3)+5(0.05)=2.5

2 -6(0.2)+2(0.2)-10(0.25)+10(0.3)+10(0.05)=5.3

3 -9(0.2)+(-1)(0.2)+7(0.25)+15(0.3)+15(0.05)=5.0

4 -12(0.2)+(-4)(0.2)+4(0.25)+12(0.3)+20(0.05)=2.4
THUS THE HIGHEST EXPECTED GAIN IS RS5.3 WHEN 2UNITS ARE
PRODUCED. SO 2 UNITS SHOULD BE PRODUCED