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ce167f11_HW4_P4_Solution

# ce167f11_HW4_P4_Solution - P = 0.6 Payoff = \$16 Lose P =...

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Bid? Bid \$16 Million Win P = 1.0 Bid \$7 million Consultant Win \$7 million P = 0.6 Lose 0\$ P = 0.4 High \$120 mill - \$5 mill P = 0.15 Medium \$28 mill - \$5 mill P = 0.35 Low \$0 mill - \$5 mill P = 0.50 Says High P = 0.15 Says Medium P = 0.35 Says Low P = 0.50 Bid \$16 million Win = 1.0 Payoff = \$99 Bid \$7 million Win P = 0.6 Payoff = \$108 Lose P = 0.4 Payoff - \$0 Bid \$16 million Win = 1.0 Payoff = \$7 High \$120 mill - \$5 mill P = 0.15 Medium \$28 mill - \$5 mill P = 0.35 Low \$0 mill - \$5 mill P = 0.50 Bid \$7 million Win
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Unformatted text preview: P = 0.6 Payoff = \$16 Lose P = 0.4 Payoff - \$0 Bid \$16 million Win = 1.0 Payoff = -\$21 Bid \$7 million Win P = 0.6 Payoff = -\$12 Lose P = 0.4 Payoff - \$0 EMV = (\$115*0.15)+(\$23*.35)+(-\$5*.5)-\$16 = \$6.80 million EMV = (\$115*0.15)+(\$23*.35)+(-\$5*.5)-\$7 = \$15.80 million EMV = \$15.8*0.6 = \$9.48 EMV = \$108*0.6 = \$64.8 EMV = \$16*0.6 = \$9.6 EMV = -\$12*0.6 = -\$7.2 EMV = (0.15*\$99) + (0.35*\$9.6) + (0.5*-\$7.2) = \$11.51...
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