(Tadelis 2.11). You\'re a sprinter, and in practice today you fell and hurt your
ID: 1167727 • Letter: #
Question
(Tadelis 2.11). You're a sprinter, and in practice today you fell and hurt your leg. An x-ray suggests that it's broken with probability 0.2. Your problem is whether you should participate in next week's tournament. If you run, you think you'll win with probability 0.1. If your leg is broken and you run, then it will be further damaged and your payoffs are as follows:
+100 if you win the race and your leg isn't broken
+50 if you win and your leg is broken
0 if you lose and your leg isn't broken
-50 if you lose and your leg is broken
0 if you don't run and your leg isn't broken
-10 if you don't run and your leg is broken
What is the value of perfect information about whether you'll win the tournament?
Explanation / Answer
Value of perfect information = 0.1 x 100 + 0.1 x 50 = 15
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.