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operations research 2 The following is the payoff profit matrix for two alternate plans: FUTURES p(0.75) ALTERNATIVES Market Receptive Market UnFavorable p(0.25) Plan A $20,000 $6,000 Plan B $25,000 $3,000 1. Which plan do you recommend adopting using the expected value criterion 2. What is the expected value of perfect information? 3. If it is known from past experience that of all the cases was receptive, a research company predicted it in 85 percent of the cases. In the other 15 percent they predicted an unfavorable market. Also, of all the cases when the market proved to be unfavorable the research company predicted it correctly in 80% of the cases.(The other 20% of the cases they predicted it incorrectly.) Find the revised probabilities of all states of nature. 4. Using the posterior probabilities, which plan would you recommend now? 5. How much should one be willing to pay (EVSI) for the research survey?

operations research 2 The following is the payoff profit matrix for two alternate plans: FUTURES p(0.75) ALTERNATIVES Market Receptive Market UnFavorable p(0.25) Plan A $20,000 $6,000 Plan B $25,000 $3,000 1. Which plan do you recommend adopting using the expected value criterion 2. What is the expected value of perfect information? 3. If it is known from past experience that of all the cases was receptive, a research company predicted it in 85 percent of the cases. In the other 15 percent they predicted an unfavorable market. Also, of all the cases when the market proved to be unfavorable the research company predicted it correctly in 80% of the cases.(The other 20% of the cases they predicted it incorrectly.) Find the revised probabilities of all states of nature. 4. Using the posterior probabilities, which plan would you recommend now? 5. How much should one be willing to pay (EVSI) for the research survey?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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operations research 2 The following is the payoff profit matrix for two alternate plans: FUTURES p(0.75) ALTERNATIVES Market Receptive Market UnFavorable p(0.25) Plan A $20,000 $6,000 Plan B $25,000 $3,000 1. Which plan do you recommend adopting using the expected value criterion 2. What is the expected value of perfect information? 3. If it is known from past experience that of all the cases was receptive, a research company predicted it in 85 percent of the cases. In the other 15 percent they predicted an unfavorable market. Also, of all the cases when the market proved to be unfavorable the research company predicted it correctly in 80% of the cases.(The other 20% of the cases they predicted it incorrectly.) Find the revised probabilities of all states of nature. 4. Using the posterior probabilities, which plan would you recommend now? 5. How much should one be willing to pay (EVSI) for the research survey?
Transcribed Image Text:operations research 2 The following is the payoff profit matrix for two alternate plans: FUTURES p(0.75) ALTERNATIVES Market Receptive Market UnFavorable p(0.25) Plan A $20,000 $6,000 Plan B $25,000 $3,000 1. Which plan do you recommend adopting using the expected value criterion 2. What is the expected value of perfect information? 3. If it is known from past experience that of all the cases was receptive, a research company predicted it in 85 percent of the cases. In the other 15 percent they predicted an unfavorable market. Also, of all the cases when the market proved to be unfavorable the research company predicted it correctly in 80% of the cases.(The other 20% of the cases they predicted it incorrectly.) Find the revised probabilities of all states of nature. 4. Using the posterior probabilities, which plan would you recommend now? 5. How much should one be willing to pay (EVSI) for the research survey?
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