# Decision Analysis Problem

• Sep 26th 2005, 02:47 PM
hashbrowny
Decision Analysis Problem
I don't even know how to get started on this problem. Should I start with a payoff table? How would I go about doing that? Thanks.

Tech has three health care plans for its faculty and staff to choose from, as follows:

Plan 1- monthly cost of \$32 with a \$500 deductible; the participants pay the first \$500 of medical costs for the year; the insurer pays 90% of all remaining expenses.

Plan 2- monthly cost of \$5 but a deductible of \$1200 with the insurer paying 90% of medical expenses after the insurer pays the first \$1200 in a year.

Plan 3- monthly cost of \$24 with no deductible; the participants pay 30% of all expenses with the remainder paid by the insurer.

Tracy Mccoy estimates her annual medical expenses are defined by the following probability distribution.

Annual Medical Expenses
\$100 (Probability .15)
\$500 (Probability .30)
\$1500 (Probablity .35)
\$3000 (Probability .10)
\$5000 (Probability .05)
\$10,000 (Probability .05)

Determine which plan Tracy should select