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Use the following payoff table to complete parts (a) through (j). The probability of event 1 is 0.20, the probability of event 2 is 0.70, and the probability of event 3 is 0.10. Action is the optimal action based on the maximax criterion because its b. Determine the optimal action based on the maximin criterion. payoff is the of all the actions. Action is the optimal action based on the maximin criterion because its payoff is the of all the actions. c. Compute the expected monetary value (EMV) for each action. EMV(A)=$ EMV(B)=$ EMV(C)=$ (Simplify your answers.) d. Compute the expected opportunity loss (EOL) for each action. EOL(A)=$ EOL(B)=$ EOL(C)=$ (Simplify your answers.) e. Explain the meaning of the expected value of perfect information (EVPI) in this problem. Choose the correct answer below. OA. The EVPI value provides a guideline for a lower bound on how much to consider paying for better information. OB. The EVPI value provides a guideline for an upper bound on how much to consider paying for better information. OC. The EVPI is the expected payoff that the company will receive with perfect information. OD. The EVPI is the value that the company should expect to pay for perfect information. ACTION EVENT Buy 100, A ($) Buy 200, B ($) Buy 500, C ($) Demand 100, 1 1,500 700 -1,700 Demand 200, 2 1,500 3,000 600 Demand 500, 3 1,500 3,000 7,500

Use the following payoff table to complete parts (a) through (j). The probability of event 1 is 0.20, the probability of event 2 is 0.70, and the probability of event 3 is 0.10. Action is the optimal action based on the maximax criterion because its b. Determine the optimal action based on the maximin criterion. payoff is the of all the actions. Action is the optimal action based on the maximin criterion because its payoff is the of all the actions. c. Compute the expected monetary value (EMV) for each action. EMV(A)=$ EMV(B)=$ EMV(C)=$ (Simplify your answers.) d. Compute the expected opportunity loss (EOL) for each action. EOL(A)=$ EOL(B)=$ EOL(C)=$ (Simplify your answers.) e. Explain the meaning of the expected value of perfect information (EVPI) in this problem. Choose the correct answer below. OA. The EVPI value provides a guideline for a lower bound on how much to consider paying for better information. OB. The EVPI value provides a guideline for an upper bound on how much to consider paying for better information. OC. The EVPI is the expected payoff that the company will receive with perfect information. OD. The EVPI is the value that the company should expect to pay for perfect information. ACTION EVENT Buy 100, A ($) Buy 200, B ($) Buy 500, C ($) Demand 100, 1 1,500 700 -1,700 Demand 200, 2 1,500 3,000 600 Demand 500, 3 1,500 3,000 7,500

Algebra & Trigonometry with Analytic Geometry
Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter10: Sequences, Series, And Probability
Section10.8: Probability
Problem 32E
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Use the following payoff table to complete parts (a) through (j). The probability of event 1 is 0.20, the probability of event 2 is 0.70, and the probability of event 3 is 0.10. Action is the optimal action based on the maximax criterion because its b. Determine the optimal action based on the maximin criterion. payoff is the of all the actions. Action is the optimal action based on the maximin criterion because its payoff is the of all the actions. c. Compute the expected monetary value (EMV) for each action. EMV(A)=$ EMV(B)=$ EMV(C)=$ (Simplify your answers.) d. Compute the expected opportunity loss (EOL) for each action. EOL(A)=$ EOL(B)=$ EOL(C)=$ (Simplify your answers.) e. Explain the meaning of the expected value of perfect information (EVPI) in this problem. Choose the correct answer below. OA. The EVPI value provides a guideline for a lower bound on how much to consider paying for better information. OB. The EVPI value provides a guideline for an upper bound on how much to consider paying for better information. OC. The EVPI is the expected payoff that the company will receive with perfect information. OD. The EVPI is the value that the company should expect to pay for perfect information. ACTION EVENT Buy 100, A ($) Buy 200, B ($) Buy 500, C ($) Demand 100, 1 1,500 700 -1,700 Demand 200, 2 1,500 3,000 600 Demand 500, 3 1,500 3,000 7,500
Transcribed Image Text:Use the following payoff table to complete parts (a) through (j). The probability of event 1 is 0.20, the probability of event 2 is 0.70, and the probability of event 3 is 0.10. Action is the optimal action based on the maximax criterion because its b. Determine the optimal action based on the maximin criterion. payoff is the of all the actions. Action is the optimal action based on the maximin criterion because its payoff is the of all the actions. c. Compute the expected monetary value (EMV) for each action. EMV(A)=$ EMV(B)=$ EMV(C)=$ (Simplify your answers.) d. Compute the expected opportunity loss (EOL) for each action. EOL(A)=$ EOL(B)=$ EOL(C)=$ (Simplify your answers.) e. Explain the meaning of the expected value of perfect information (EVPI) in this problem. Choose the correct answer below. OA. The EVPI value provides a guideline for a lower bound on how much to consider paying for better information. OB. The EVPI value provides a guideline for an upper bound on how much to consider paying for better information. OC. The EVPI is the expected payoff that the company will receive with perfect information. OD. The EVPI is the value that the company should expect to pay for perfect information. ACTION EVENT Buy 100, A ($) Buy 200, B ($) Buy 500, C ($) Demand 100, 1 1,500 700 -1,700 Demand 200, 2 1,500 3,000 600 Demand 500, 3 1,500 3,000 7,500
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