Deborah Hollwager, a concessionaire for the Des Moines ballpark,has developed a
ID: 2444331 • Letter: D
Question
Deborah Hollwager, a concessionaire for the Des Moines ballpark,has developed a table of conditional values for the variousalternatives (stocking decision) and states of nature (size ofcrowd).
Ifthe probabilities associated with the states of nature are 0.3 fora large crowd, 0.5 for an average crowd, and 0.2 for a small crowd,determine:
Which alternative provides the greatest expected monetary value(EMV)? Is it : A. Average inventory, B. Largeinventory, C. Small inventory.
What is the value of this EMV?
Round your answer to the nearest whole number; forexample, 12,345 .
Determine the expected value of perfect information(EVPI).
Round your answer to the nearest whole number; forexample, 1234 .
Deborah Hollwager, a concessionaire for the Des Moines ballpark,has developed a table of conditional values for the variousalternatives (stocking decision) and states of nature (size ofcrowd).
States ofNature (Size of Crowd) Alternatives Large Average Small Largeinventory $20,000 $10,000 -$2,000 Averageinventory $15,000 $12,000 $6,000 Smallinventory $9,000 $6,000 $2,000Ifthe probabilities associated with the states of nature are 0.3 fora large crowd, 0.5 for an average crowd, and 0.2 for a small crowd,determine:
(a)Which alternative provides the greatest expected monetary value(EMV)? Is it : A. Average inventory, B. Largeinventory, C. Small inventory.
What is the value of this EMV?
Round your answer to the nearest whole number; forexample, 12,345 .
(b) Determine the expected value of perfect information(EVPI).
Round your answer to the nearest whole number; forexample, 1234 .
Explanation / Answer
A) Large = .3 * 20 + .5 * 10 + .2 * -2 = 10.6k Avg = .3 * 15 + .5 * 12 + .2 * 6 = 11.7k Small = .3 * 9 * .5 * 6 + .2 * 2 = 8.5k Average has the highest EMV of 11.7k. B) If we have perfect information, we can always select the bestdecision. Therefore, if the crowd is large, we will have alarge inventory. If the crowd is average, we will have anaverage inventory. If the crowd is small, we will have anaverage inventory. EVPI = .3 * 20 + .5 * 12 + .2 * 6 = 13.2k
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.