Calculate the EVSI.
Explanation of Solution
Table 1 shows that the posterior probabilities for I1.
Table 1
sj | P(sj) | |||
s1 | 0.15 | 0.5 | 0.075 | 0.25 |
s2 | 0.55 | 0.3 | 0.165 | 0.55 |
s3 | 0.3 | 0.2 | 0.06 | 0.2 |
Total | 0.3 |
Table 2 shows that the posterior probabilities for I2.
Table 2
sj | P(sj) | |||
s1 | 0.15 | 0.3 | 0.045 | 0.103 |
s2 | 0.55 | 0.6 | 0.33 | 0.759 |
s3 | 0.3 | 0.2 | 0.06 | 0.138 |
Total | 0.435 |
Table 3 shows that the posterior probabilities for I3.
Table 2
sj | P(sj) | |||
s1 | 0.15 | 0.2 | 0.03 | 0.113 |
s2 | 0.55 | 0.1 | 0.055 | 0.208 |
s3 | 0.3 | 0.6 | 0.18 | 0.679 |
Total | 0.265 |
The EMV value of a1 with I1 can be calculated as follows.
The value of EMV of a1 is -324.5.
The EMV value of a2 with I1 can be calculated as follows.
The value of EMV of a2 is -329.
The EMV value of a3 with I1 can be calculated as follows.
The value of EMV of a3 is -350. Since the EMV value of a1 is greater, select the option a1.
The EMV value of a1 with I2 can be calculated as follows.
The value of EMV of a1 is -333.85.
The EMV value of a2 with I2 can be calculated as follows.
The value of EMV of a2 is -327.59.
The EMV value of a3 with I2 can be calculated as follows.
The value of EMV of a3 is -350. Since the EMV value of a2 is greater, select the option a2.
The EMV value of a1 with I3 can be calculated as follows.
The value of EMV of a1 is -392.26.
The EMV value of a2 with I3 can be calculated as follows.
The value of EMV of a2 is -365.28.
The EMV value of a3 with I3 can be calculated as follows.
The value of EMV of a3 is -350. Since the EMV value of a3 is greater, select the option a3.
The EMV value can be calculated as follows.
The value of EMV is -332.6.
The EVSI value can be calculated as follows.
The value of EVSI is 5.4.
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Chapter 22 Solutions
Statistics for Management and Economics (Book Only)
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