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The probabilities for the states of nature are: P(A) = 0.65, P(B) = 0.15, and P(C) = 0.20. i). What is the optimal decision value if perfect information were available? ii). Using the EMV approach, what is the recommended decision? What is its expected monetary value? iii). What is the expected value of perfect information?

The probabilities for the states of nature are: P(A) = 0.65, P(B) = 0.15, and P(C) = 0.20. i). What is the optimal decision value if perfect information were available? ii). Using the EMV approach, what is the recommended decision? What is its expected monetary value? iii). What is the expected value of perfect information?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Given the following payoff table: i). ii). Decision Alternative iii). 1 2 A 250 100 The probabilities for the states of nature are: P(A) = 0.65, P(B) = 0.15, and P(C) = 0.20. State of Nature B 100 100 What is the optimal decision value if perfect information were available? C 25 75 Using the EMV approach, what is the recommended decision? What is its expected monetary value? What is the expected value of perfect information?
Transcribed Image Text:Given the following payoff table: i). ii). Decision Alternative iii). 1 2 A 250 100 The probabilities for the states of nature are: P(A) = 0.65, P(B) = 0.15, and P(C) = 0.20. State of Nature B 100 100 What is the optimal decision value if perfect information were available? C 25 75 Using the EMV approach, what is the recommended decision? What is its expected monetary value? What is the expected value of perfect information?
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