ACCA PM · Chapter 9 · Question 7 of 11
Which of the following is a limitation of using expected values for decision-making?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The expected value may not correspond to any actual outcome, so it is less reliable for one-off decisions
Explanation
An expected value is a long-run average; it is most meaningful for decisions repeated many times. For a one-off decision the actual result will be one of the possible outcomes, not the EV. It also ignores the decision-maker's attitude to risk and depends on reliable probability estimates.
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