Question

u Question 6 10 pts The following is a payoff table giving profits for various situations. Alternatives Alternative 1 Alternative 2 Alternative 3 Do Nothing States of Nature A B с 100 120 180 200 100 50 120 140 120 0 0 0 The probabilities for states of nature A, B, and Care 0.3, 0.5, and 0.2, respectively. What is the expected value with perfect information (EVwPI)? 0 130 O 160 O 166 O 36 O126

Answer 1

For expected value with perfect information, we use the maximum payoffs for each state of nature to obtain the expected value here as:
EVwPI = P(A)*Max(A) + P(B)*Max(B) + P(C)*Max(C)

= 0.3*200 + 0.5*140 + 0.2*180

= 60 + 70 + 36

= 166

Therefore 166 is the required expected value here.