ABC Condominium Corp. of Baguio City, recently purchased land and is attempting to determine the size of the condominium development it should build. It is considering three sizes of development: small (D1); medium (D2); and large (D3). With the three levels of demand- low (S1), medium (S2) and high (S3), the company’s management has prepared the following profit payoff table: Decision Alternatives Low (S1) Medium (S2) High (S3) D1- Small Condo 400,000 400,000 400,000 D2- Medium Condo 100,000 600,000 600,000 D3- Large Condo (300,000) 300,000 900,000 Required: 9. Assuming the probabilities for the state of nature are P(S1)=0.20; P(S2)=0.35 and P(S3)= 0.45, what decision should ABC Condominium Corp make? 10. Using the information from No. 9, what is the relevant income in ABC's decision? 11. Using information in No. 9 , at how much will the "Medium condo, high demand" payoff would be indifferent between the "Medium condo" and "Large condo” decisions, given all other applicable data input items remain the same? 12. Using information in No. 9, Compute for the Expected Value of Perfect Information. 13. Using information in No. 9, Suppose that before making a final decision, ABC Condominium Corp is considering conducting a survey to help evaluate the demand for the new condominium development. The survey report anticipated to indicate one o the three levels of demand: weak (W), average (A) or strong (S). The relevant probabilities are as follows: P(S1 I W) = .75 P(S1 I S) = .25 P(S2 I W) = .70 P(S2 I S) = .30 P(S3 I W) = .45 P(S3 I S) = .55 A. What is the expected value with sample information? B. What is the expected value of sample information? C. What is the efficiency of the survey information?
ABC Condominium Corp. of Baguio City, recently purchased land and is attempting to determine the size of the condominium
development it should build. It is considering three sizes of development: small (D1); medium (D2); and large (D3). With the three
levels of demand- low (S1), medium (S2) and high (S3), the company’s management has prepared the following profit payoff table:
| Decision Alternatives | Low (S1) | Medium (S2) | High (S3) |
| D1- Small Condo | 400,000 | 400,000 | 400,000 |
|
D2- Medium Condo |
100,000 | 600,000 | 600,000 |
| D3- Large Condo | (300,000) | 300,000 | 900,000 |
Required:
9. Assuming the probabilities for the state of nature are P(S1)=0.20; P(S2)=0.35 and P(S3)= 0.45, what decision should ABC
Condominium Corp make?
10. Using the information from No. 9, what is the relevant income in ABC's decision?
11. Using information in No. 9 , at how much will the "Medium condo, high demand" payoff would be indifferent between the
"Medium condo" and "Large condo” decisions, given all other applicable data input items remain the same?
12. Using information in No. 9, Compute for the
13. Using information in No. 9, Suppose that before making a final decision, ABC Condominium Corp is considering conducting a
survey to help evaluate the demand for the new condominium development. The survey report anticipated to indicate one o
the three levels of demand: weak (W), average (A) or strong (S). The relevant probabilities are as follows:
| P(S1 I W) = .75 | P(S1 I S) = .25 |
| P(S2 I W) = .70 | P(S2 I S) = .30 |
| P(S3 I W) = .45 | P(S3 I S) = .55 |
A. What is the expected value with sample information?
B. What is the expected value of sample information?
C. What is the efficiency of the survey information?
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