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Chapter09slides - problem 9 Determining the EVPI 10...

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Revising Judgements in the Light of New Information 1
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Bayes’ theorem 2 Prior probability New information Posterior probability
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The components problem 3
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Applying Bayes’ theorem to the components problem 4
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Vague priors and very reliable information 5
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6 The effect of the reliability of information on the modification of prior probabilities
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The retailer’s problem with prior probabilities 7
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Applying Bayes’ theorem to the retailer’s problem 8
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Applying posterior probabilities to the retailer’s
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Unformatted text preview: problem 9 Determining the EVPI 10 Calculating the EVPI 11 Deciding whether to buy imperfect information 12 If test indicates virus is present 13 If test indicates virus is absent 14 Determining the EVII 15 Expected profit with imperfect information = $62155 Expected profit without the information = $57 000 Expected value of imperfect information (EVII) = $5155 16...
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