A First Course in Probability (10th Edition)
10th Edition
ISBN: 9780134753119
Author: Sheldon Ross
Publisher: PEARSON
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Transcribed Image Text:2 Viral Outbreak Viral fragments have been detected in a local waste-water sample. The
virus may turn out to be either highly infectious, moderately infectious or not infectious. The
government must decide whether or not to place the local area into a two week lockdown.
Without a lockdown the cost to the local economy is $800M (M=million) for a highly infectious
virus, $150M for a moderately infectious virus, or $20M for a not infectious virus. Implementing
a two week lockdown has a cost of $200M to the local economy in addition to $80M if the virus is
highly infectious, $10M if the virus is moderately infections, or $1M if the virus is not contagious.
You are appointed as an adviser to the government on this decision.
(a) Construct the payoff table for this decision.
(b) Calculate the EMVS for the two decisions (“No Lockdown", "Lockdown") if the probabil-
ities of highly, moderately and not infectious are 0.2, 0.45 and 0.35 respectively.
(c) What would be a sensible objective in this scenario and, based on your calculations, what
do you advise the government to do?
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