Provides the greatest expected monetary value

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Reference no: EM131360393

Problem -

Deborah Hollwager, a concessionaire for the Amway Center in Orlando, has developed a table of conditional values for the various alternatives (stocking decisions) and states of nature (size of crowd):

 

States of Natures (Size of Crowed)

Alternatives

Large

Average

Small

Large inventory

$20,000

$10,000

-$2,000

Average inventory

$15,000

$12,000

$6,000

Small inventory

$9,000

$6,000

$5,000

If the probabilities associated with the states of nature are 0.3 for a large crowd, 0.5 for an average crowd, and 0.2 for a small crowd, determine:

a) The alternative that provides the greatest expected monetary value (EMV).

b) The expected value of perfect information (EVPI).

Reference no: EM131360393

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