Question 4 A high school student, who started doing photography as a hobby, is considering going into the photography business. The anticipated payoff table is: Alternative State of Nature Start Do Not Start new business -RM12,000 RM10,000 RM15,000 new business Poor Fair Super The following prior probabilities are assigned to the states of nature: P (poor) = 0.4, P (fair) = 0.4, and P (super) = 0.2. Calculate the expected monetary value for each act with present information. What decision should be made using the EMV criterion? Convert the payoff table to an opportunity loss table. Calculate the expected opportunity loss for each act with present information. What decision should be made using the EOL criterion? What is the expected payoff with perfect information? What is the expected value of perfect information? What does it mean? (a) (b) (c) (d) (e)
Question 4 A high school student, who started doing photography as a hobby, is considering going into the photography business. The anticipated payoff table is: Alternative State of Nature Start Do Not Start new business -RM12,000 RM10,000 RM15,000 new business Poor Fair Super The following prior probabilities are assigned to the states of nature: P (poor) = 0.4, P (fair) = 0.4, and P (super) = 0.2. Calculate the expected monetary value for each act with present information. What decision should be made using the EMV criterion? Convert the payoff table to an opportunity loss table. Calculate the expected opportunity loss for each act with present information. What decision should be made using the EOL criterion? What is the expected payoff with perfect information? What is the expected value of perfect information? What does it mean? (a) (b) (c) (d) (e)
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 30P
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