A manufacturing company introduces two product alternatives. The table below provides profit payoffs in thousands of dollars.

The probabilities for the state of nature are P(Up) = 0.35, P(Stable) = 0.35, and P(Down) = 0.30.
a. Use a decision tree to recommend a decision.
b. Use EVPI to determine whether the manufacturing company should attempt to obtain a better estimate of the response.

Question

A manufacturing company introduces two product alternatives. The table below provides profit payoffs in thousands of dollars.
  
The probabilities for the state of nature are P(Up) = 0.35, P(Stable) = 0.35, and P(Down) = 0.30. 
a. Use a decision tree to recommend a decision.
b. Use EVPI to determine whether the manufacturing company should attempt to obtain a better estimate of the response.

Quizplus · Accepted Answer

The Answer of A manufacturing company introduces two product alternatives. The table below provides profit payoffs in thousands of dollars.
  
The probabilities for the state of nature are P(Up) = 0.35, P(Stable) = 0.35, and P(Down) = 0.30. 
a. Use a decision tree to recommend a decision.
b. Use EVPI to determine whether the manufacturing company should attempt to obtain a better estimate of the response.

A Manufacturing Company Introduces Two Product Alternatives