chapter05s_ls - Lecture Suggestions - Supplement to Chapter...

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Lecture Suggestions - Supplement to Chapter 5 Example 8: Sensitivity Analysis 1. states of nature (S1, S2) have been entered. 2. of the probability of S2 between 0 and 1. For example, the EMV for alternative A is graphed in the dark blue line. You can point to the two endpoints of this line and show that when P(S2) = 0 (and P(S1)=1) then EMV(alt A) = 4, and when P(S1) = 1 then EMV(alt A) = 12. You may want to review the formula for computing EMV. 3. table in the extreme lower right hand corner. 4. a. Start with P(S2) = 0 and point out that alternate B has the maximum EMV=16, as shown in red in the same table in the lower right b. Then click the spinner button and point out that at P(S2)=.4 there is a tie between alternatives B and C, both with an EMV=10.4. c. Continue to click the spinner button and point out that when P(S2) is between .4 and .6, alternative C has the max EMV, but at P(S2)=.7, alternative A has the maximum EMV. d.
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