Calculate minimal expected amount, Econometrics

A store is known for is bargains. The store has the habit of lowering the price of its bargains each day, to ensure that articles are sold fast. Assume that you spot an item on Wednesday (there is only one of it left) that costs 30 Euro and that you would like to buy for a friend as present for Saturday. You know that the price will be lowered to 25 Euro on Thursday when the item is not sold, and to l0 Euro on Friday. You estimate that the probability that the item will be available on Thursday equals 0.7. You further estimate that assuming that it is still available on Friday when it was available on Thursday equals 0.6. You are sure that the item will no longer be available on Saturday. When you postpone your decision to buy the item to either Thursday or Friday, and the item is sold, you will buy another item of 40 Euro as present for Saturday.

a) Formulate the problem as stochastic dynamic programming problem. Specify phases, states, decisions and the optimal value function.
b) Draw the decision tree for this problem.
c) Give the recurrence relations for the optimal value function.
d) What is the minimal expected amount that you will pay for your present, and what is the optimal decision on Wednesday?

 

Posted Date: 3/5/2013 8:06:47 AM | Location : United States







Related Discussions:- Calculate minimal expected amount, Assignment Help, Ask Question on Calculate minimal expected amount, Get Answer, Expert's Help, Calculate minimal expected amount Discussions

Write discussion on Calculate minimal expected amount
Your posts are moderated
Related Questions
You have collected data for 104 countries to address the difficult questions of the determinants for differences in the standard of living among the countries of the world. You rec

How Has Quantitative Analysis Changed The Current Scenario In The Management World Today?

what are factors contributing to the long run trend interms of trade of developing countries?



The following regression was estimated to explain the inflation rate in the USA.  The data set contains annual observations from 1970 to 2010.       Inft  =  2500 +   50*Xt  +

Problem: (a) Differentiate between linear and log-linear model. (b) Distinguish between type I and type II errors. (c) (i) A bulb manufacturer claims that its bulbs last

Provide a clear statement of the research topic and the underlying relationship that you are modeling. Identify the dependent variable and the independent variables (minimum of 3 i

if there is no autocorrelation what will be done