Andrew Thomas, a sandwich vendor at Hard Rock Cafe’s annual Rockfest, created a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd):

STATES OF NATURE (DEMAND)

ALTERNATIVES BIG AVERAGE SMALL Large stock $22,000 $12,000 –$2,000 Average stock $14,000 $10,000 $6,000 Small stock $ 9,000 $ 8,000 $4,000 The probabilities associated with the states of nature are 0.3 for a big demand, 0.5 for an average demand, and 0.2 for a small demand.

a) Determine the alternative that provides Andrew the greatest expected monetary value (EMV).

b) Compute the expected value of perfect information (EVPI). L01