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Linear Prog COP4355_Part_43

# Linear Prog COP4355_Part_43 - Chapter 15 Decision Analysis...

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176 Chapter 15 Decision Analysis 15.8 (continued) (d) Under perfect information, If outcome is G, select B If outcome is F, select C (e) EVPI = 4 – 0 = 4 Value of probability of outcome G that makes alternatives B and C equally attractive is: 60(P) + (-20)(1-P) = 40(P) + (-10)(1-P) 80P – 20 = 50P – 10 30P = 10 P = 1 3 15.9 (a) Optimal alternative = B (b) Expected value of payoff = 44 (c) Expected regret = 2 A C G F B . 8 2 20 26 44 30 16 2 30 30 P R -20 10 0 60 -20 10 40 20 -10 0

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Solutions Manual and Workbook 177 15.9 (d) Under perfect information, If outcome is G, select B If outcome is F, select C (e) EVPI = 46 – 44 = 2 or EVPI = 2 – 0 = 2 A C G .8 B F .2 G 0 B F 1 G 1 B F 0 F 0 G . 8 F 2 D e c i s o n u d r Prior info. Decide using perfect info 20 26 44 2 30 0 0 16 30 30 60 40 20 -20 10 -20 10 -10 P R 30 30 -20 10 0 60 10 -20 20 40 -10 0 30 30 -20 10 60 0 -20 10 40 20 -10 0 30 30 -20 10 60 0 -20 10 40 20 -10 0 46 0
178 Chapter 15 Decision Analysis DECISIONS UNDER PRIOR AND PERFECT INFORMATION 15.10 (a)and (b) (c) Expected payoff: \$600,000; expected regret: \$220,000; Optimal choice is to settle out of court. (e) EVPI – EV(Regret) = \$220,000 t r i a l s e . 1 .2 3 4 Regret Payoff \$ 0 \$ 2M \$ 1M \$ 0 \$.5M \$.1M \$ 0 \$.6M \$.6M \$.6M \$.6M \$.6M \$ 0 \$ 0 \$.4M \$ 1.4M \$.55M

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Linear Prog COP4355_Part_43 - Chapter 15 Decision Analysis...

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