A restaurant has seven tables and only serves patrons with reservations. If more

Question

A restaurant has seven tables and only serves patrons with reservations. If more customers with reservations show up than the number of available tables, the restaurant incurs a cost of $145 associated with customer ill will and lost future business. Each empty table costs the restaurant $100 in lost profits. Historical records related to no shows indicate the following. What is the expected value of perfect information?
Number of No Shows

Number of   No shows Probability 0 0.2 1 0.3 2 0.4 3 0.1

Explanation / Answer

for 0 --> 0.2*100 + 0.8*145 = $136

for 1 --> 0.3*100 + 0.7*145 = $ 131.5

for 2 --> 0.4*100 + 0.6*145 = $127

for 3 --> 0.1*100 + 0.9*145 = $141.5

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