The owner of a new gourmet kitchenware shop wishes to determine how many days and evenings to keep the shop open. The various payoffs (in $ 1,000s) are indicated in the table below. Assume the probabilities of the three states of nature are P(S₁) = 0.60, P(S₂) = 0.30, and P(S₃) = 0.1.
a.Determine the expected value of each alternative and indicate which decision alternative is the best.
b.Determine the expected value with perfect information about the states of nature.
c.Determine the expected value of perfect information.

Question

The owner of a new gourmet kitchenware shop wishes to determine how many days and evenings to keep the shop open. The various payoffs (in $ 1,000s) are indicated in the table below.

Assume the probabilities of the three states of nature are P(S₁) = 0.60, P(S₂) = 0.30, and P(S₃) = 0.1.
a.Determine the expected value of each alternative and indicate which decision alternative is the best.
b.Determine the expected value with perfect information about the states of nature.
c.Determine the expected value of perfect information.

Quizplus · Accepted Answer

The Answer of The owner of a new gourmet kitchenware shop wishes to determine how many days and evenings to keep the shop open. The various payoffs (in $ 1,000s) are indicated in the table below. Assume the probabilities of the three states of nature are P(S₁) = 0.60, P(S₂) = 0.30, and P(S₃) = 0.1. a.Determine the expected value of each alternative and indicate which decision alternative is the best. b.Determine the expected value with perfect information about the states of nature. c.Determine the expected value of perfect information.

The Owner of a New Gourmet Kitchenware Shop Wishes to Determine