Decision Analysis Problem 2

Decision Analysis Problem 2 - b For this payoff table find...

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Decision Analysis - Problem 2 Jim has been employed at Gold Key Realty at a salary of $2,000 per month during the past year. Because Jim is considered to be a top salesman, the manager of Gold Key is offering him one of three salary plans for the next year: (1) a 25% raise to $2,500 per month; (2) a base salary of $1,000 plus $600 per house sold; or, (3) a straight commission of $1,000 per house sold. Over the past year, Jim has sold up to 6 homes in a month. a) Compute the monthly salary payoff table for Jim
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Unformatted text preview: b) For this payoff table find Jim's optimal decision using: (1) the conservative approach, (2) minimax regret approach, (3) optimistic approach c) Suppose that during the past year the following is Jim's distribution of home sales. If one assumes that this is a typical distribution of Jim's monthly sales, which salary should Jim select? Home sales Number of months 1 1 2 2 3 1 4 2 5 1 6 3 7 2 d) What is the EVPI (expected value of perfect information)?...
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