Pete is considering placing a bet on the NCAA playoffgame between Indiana and Purdue. Without any furtherinformation, he believes that each team has an equal chanceto win. If he wins the bet, he will win $10,000; if he loses,he will lose $11,000. Before betting, he may pay Bobby$1,000 for his inside prediction on the game; 60% of thetime, Bobby will predict that Indiana will win and 40% ofthe time, Bobby will predict that Purdue will win. WhenBobby says that IU will win, IU has a 70% chance ofwinning, and when Bobby says that Purdue will win, IU hasonly a 20% chance of winning. Determine how Pete canmaximize his total expected profit. What is EVSI? What isEVPI?
Pete is considering placing a bet on the NCAA playoffgame between Indiana and Purdue. Without any furtherinformation, he believes that each team has an equal chanceto win. If he wins the bet, he will win $10,000; if he loses,he will lose $11,000. Before betting, he may pay Bobby$1,000 for his inside prediction on the game; 60% of thetime, Bobby will predict that Indiana will win and 40% ofthe time, Bobby will predict that Purdue will win. WhenBobby says that IU will win, IU has a 70% chance ofwinning, and when Bobby says that Purdue will win, IU hasonly a 20% chance of winning. Determine how Pete canmaximize his total expected profit. What is EVSI? What isEVPI?
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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Question
Pete is considering placing a bet on the NCAA playoff
game between Indiana and Purdue. Without any further
information, he believes that each team has an equal chance
to win. If he wins the bet, he will win $10,000; if he loses,
he will lose $11,000. Before betting, he may pay Bobby
$1,000 for his inside prediction on the game; 60% of the
time, Bobby will predict that Indiana will win and 40% of
the time, Bobby will predict that Purdue will win. When
Bobby says that IU will win, IU has a 70% chance of
winning, and when Bobby says that Purdue will win, IU has
only a 20% chance of winning. Determine how Pete can
maximize his total expected profit. What is EVSI? What is
EVPI?
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