PSH Construction Company (PCC) is looking at the upcoming state election. Control of both the state senate and the house are up for grabs in this election. PCC is planning to bid on a number of possible projects. Given the state laws, PCC can only work on one contract at a time. Having reviewed the candidates’ positions, PCC developed a decision matrix that identifies the possible profits for PCC if the Democrats win both the senate and the house, or if the Republicans win both the senate and the house, or if the two parties split—one party wins the senate and the other party wins the house. Their matrix is provided below. According to a Will Franklin, a psephologist from Philadephia, Pa., the probability of a Democrat win is 0.3, a Republican win is 0.5, and a split vote is 0.2. What would be the value of perfect information for Will Franklin? What option should PCC make based on Will Franklin's estimates? State Election Outcomes Projects Democrats Republican Split Project A $1,000,000 $600,000 $800,000 Project B $2,500,000 $1,800,000 $2,000,000 Project C $1,300,000 $3,000,000 $1,800,000 Project D $1,500,000 - $2,500,000
PSH Construction Company (PCC) is looking at the upcoming state election. Control of both the state senate and the house are up for grabs in this election. PCC is planning to bid on a number of possible projects. Given the state laws, PCC can only work on one contract at a time. Having reviewed the candidates’ positions, PCC developed a decision matrix that identifies the possible profits for PCC if the Democrats win both the senate and the house, or if the Republicans win both the senate and the house, or if the two parties split—one party wins the senate and the other party wins the house. Their matrix is provided below. According to a Will Franklin, a psephologist from Philadephia, Pa., the probability of a Democrat win is 0.3, a Republican win is 0.5, and a split vote is 0.2. What would be the value of perfect information for Will Franklin? What option should PCC make based on Will Franklin's estimates?
|
State Election Outcomes |
|||
|
Projects |
Democrats |
Republican |
Split |
|
Project A |
$1,000,000 |
$600,000 |
$800,000 |
|
Project B |
$2,500,000 |
$1,800,000 |
$2,000,000 |
|
Project C |
$1,300,000 |
$3,000,000 |
$1,800,000 |
|
Project D |
$1,500,000 |
- |
$2,500,000 |
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