Final 2001 Part 1 solutions

Final 2001 Part 1 solutions - MS&amp;E 252 Decision...

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MS&E 252 Solutions to Probabilistic Problems 2001 Practice Final Decision Analysis I December 6 th , 2007 1) Solution: a Alice did not violate any of the rules of actional thought. She stated that the only preference she has is that she goes somewhere from here which is ok. 2) Solution: b Her preference probability for the Olives pizza can be calculated by the following tree: Where the second tree is that of Pepperoni Pizza. 3) Solution: a Note that Nina already owns the deal and hence knowing the color that she will pick will not affect any decision that she will make. The information is not material to her and thus has a value of \$0. 4) Solution: b You can do this by direct substitution. Just subtract 25.75 from the prospects and you will find that the deal is worth \$100 (which is the current wealth) and hence 25.75 is the PIBP. Note that you must add \$100 to the prospects to include the wealth effect as the person is not delta. 5)

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This note was uploaded on 06/16/2010 for the course MS&E 252 taught by Professor Howard during the Fall '08 term at Stanford.

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Final 2001 Part 1 solutions - MS&amp;E 252 Decision...

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