MIT15_053S13_rec10sol

B after deciding whether to play the game tom asks

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Unformatted text preview: . Part 2.B After deciding whether to play the game, Tom asks the carnie if the third shell has the ball under it. Since we all know carnies never try to deceive anyone, you know that what he tells you will be correct. What is the greatest amount that Tom should be willing to pay for this perfect information? 2 Solution. The decision tree is: E [C ] = 1 × 2 − 0 × 1 = 2, E [D] = 1/4 × 2 − 3/4 × 1 = −0.25, E [B ] = 0.2 × 2 − 0.8 × 0.25 = 0.2. So the value of information is $0.2. Part 2.C Suppose instead that Tom asks the carnie before decidin...
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