Question
The following table lists the profitability of four alternatives and states of nature that a manger...
The following table lists the profitability of four alternatives and states of nature that a manger faces.
| Alternative | S1 | S2 | S3 | S4 |
| D1 | 14 | 9 | 10 | 5 |
| D2 | 11 | 10 | 8 | 7 |
| D3 | 9 | 10 | 10 | 11 |
| D4 | 8 | 10 | 11 | 13 |
| Probability | 10% | 20% | 40% | 30% |
The EVPI is
Homework Answers
Answer #1
Probability |
10% | 20% | 40% | 30% | |
| Alternative | S1 | S2 | S3 | S4 | EMV |
| D1 | 14 | 9 | 10 | 5 | 14*0.1+9*0.2+10*0.4+5*0.3 = 8.7 |
| D2 | 11 | 10 | 8 | 7 | 11*0.1+10*0.2+8*0.4+7*0.3 = 8.4 |
| D3 | 9 | 10 | 10 | 11 | 9*0.1+10*0.2+10*0.4+11*0.3 = 10.2 |
| D4 | 8 | 10 | 11 | 13 | 8*0.1+10*0.2+11*0.4+13*0.3 = 11.1 |
In general, EVPI = EPPI - Max( EMV )
where EPPI = 
= 14 * 0.10 + 10 * 0.20 + 11 * 0.40 + 13 * 0.30
= 11.7
And EMV = 
Max (EMV) = 11.1
EVPI = 11.7 - 11.1 = 0.6
Hope this answers your query!
Not the answer you're looking for?
Similar Questions
Below is a payoff table involving three states of nature and three decision alternatives. Decision States...
Below is a payoff table involving three states of nature and
three decision alternatives. Decision States of Nature Alternative
s1 s2 s3 A –20 10 15 B 16 –5 8 C 15 25 –10 The probability of
occurrence of s1 is .2, and the probability of occurrence of s2 is
.3. The expected value of alternative C is _____.
Q.1 Payoff Table: Choices: D1, D2, D3. States of Nature: S1, S2, S3. Profit( in millions)...
Q.1 Payoff Table: Choices: D1, D2, D3. States of Nature: S1, S2,
S3. Profit( in millions) for each of the States of Nature are given
below: For D1: $100, $400, $500. For D2:-$100, $500, $900. For D3:
-$200, $500, $1600. P(s1)=0.4, P(s2)=0.4, P(s3)=0.2. Sample
Information Data: Market Research Firm provides following data:
conditional probabilities: P(Fav/s1)= 0.40, P(Fav/s2)= 0.5,
P(Fav/s3)= 0.9. Then P(Fav)= .54
For the data given in Q.1, compute revised probabilities, draw
the decision tree, and enter the payoff...
State of Nature Decision Alternative s1 s2 s3 s4 d1 600 400 -100 120 d2 700...
State
of
Nature
Decision Alternative
s1
s2
s3
s4
d1
600
400
-100
120
d2
700
-200
0
400
d3
700
-200
0
400
P(si)
0.3
0.4
0.2
0.1
For a lottery having a payoff 700 with probability p and -200
with probability (1-p), the decision maker expressed the following
indifference probability. Suppose U (700) =100 and U (-200)
=-10.
Payoff
Indifferent Probability
600
0.95
400
0.8
120
0.5
0
0.35
-100
0.2
a) Complete the utility table by using...
Consider a decision situation with four possible states of nature: s1, s2, s3, and s4. The...
Consider a decision situation with four possible states of
nature: s1, s2,
s3, and s4. The prior
probabilities are P(s1) = 0.35,
P(s2) = 0.15,
P(s3) = 0.20,
P(s4) = 0.30. The conditional
probabilities are P(C|s1) =
0.2, P(C|s2) = 0.09,
P(C|s3) = 0.15, and
P(C|s4) = 0.20. Find the
revised (posterior) probabilities
P(s1|C),
P(s2|C),
P(s3|C), and
P(s4|C).
A company is considering advertising its new product on TV on Super Bowl Sunday. Let d1,...
A company is considering advertising its new product on TV on
Super Bowl Sunday.
Let d1, d2 and d3 represent its
decision to purchase one, two or three 30-second commercials
respectively.
Dependent on whether the game is S1 = “Dull,”
S2 =“Average”, S3 =“Above average,” or
S4 = “Exciting,” their probabilities and profits are as
follows:
S1
S2
S3
S4
Probability
0.1
0.3
0.4
0.2
d1
5
12
10
8
d2
-5
6
12
12
d3
7
14
-6
13...
A company is considering advertising its new product on TV on Super Bowl Sunday. Let d1,...
A company is considering advertising its new product on TV on
Super Bowl Sunday.
Let d1, d2 and d3 represent its
decision to purchase one, two or three 30-second commercials
respectively.
Dependent on whether the game is S1 = “Dull,”
S2 =“Average”, S3 =“Above average,” or
S4 = “Exciting,” their probabilities and profits are as
follows:
S1
S2
S3
S4
Probability
0.1
0.3
0.4
0.2
d1
5
12
10
8
d2
-5
6
12
12
d3
7
14
-6
13...
The following payoff table shows a profit for a decision analysis problem with two decision alternatives...
The following payoff table shows a profit for a decision
analysis problem with two decision alternatives and three states of
nature. In order to get full credit, show your all work done step
by step including cell calculations using excel functions.
State of Nature
Decion Alternatives
s1
s2
s3
d1
250
100
50
d2
100
75
100
a) Construct a decision tree for this problem.
b) Suppose that the decision-maker obtains the probabilities
P(s1)=0.65, P(s2)=0.15, and P(s3)=0.20.
Use the expected...
Problem 13-14 (Algorithmic) The following profit payoff table shows profit for a decision analysis problem with...
Problem 13-14 (Algorithmic) The following profit payoff table
shows profit for a decision analysis problem with two decision
alternatives and three states of nature: State of Nature Decision
Alternative S1 S2 S3 d1 250 100 100 d2 200 100 150 The
probabilities for the states of nature are P(s1) = 0.45, P(s2) =
0.25 and P(s3) = 0.3. What is the optimal decision strategy if
perfect information were available? S1 : S2 : S3 : What is the
expected value...
Consider the following Profit Payoff Table: State of Nature Decision Alternative S1 S2 S3 d1 250...
Consider the following Profit Payoff Table:
State of Nature
Decision Alternative
S1
S2
S3
d1
250
100
25
d2
100
100
75
The probabilities for the states of nature are
P(S1) = 0.65,
P(S2) = 0.15, and
P(S3) = 0.20.
What is the optimal decision strategy if perfect information
were available?
What is the expected value for the decision strategy developed
in part (a)?
Using the expected value approach, what is the recommended
decision without perfect information? What is its...
Problem 13-01 (Algorithmic) The following payoff table shows profit for a decision analysis problem with two...
Problem 13-01 (Algorithmic) The following payoff table shows
profit for a decision analysis problem with two decision
alternatives and three states of nature: State of Nature Decision
Alternative S1 S2 S3 d1 260 140 100 d2 170 130 50 Choose the
correct decision tree for this problem. (i) d2d1s3s2s1s3s2s1 (ii)
d2d1s3s3s2s2s1s1 (iii) s3s2s1d2d1d2d1d2d1 (iv) d2d1s3s2s1s3s2s1 If
the decision maker knows nothing about the probabilities of the
three states of nature, what is the recommended decision using the
optimistic, conservative, and...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 14 minutes ago
asked 17 minutes ago
asked 25 minutes ago
asked 45 minutes ago
asked 49 minutes ago
asked 52 minutes ago
asked 55 minutes ago
asked 59 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago