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Christaker is considering transitioning to a new job next year. He will either keep his current job which pays a net income of $75.000 or
Christaker is considering transitioning to a new job next year. He will either keep his current job which pays a net income of $75.000 or switch to a new job. If he changes jobs, his net income will vary depending on the state of the economy. He estimates that the economy will be Strong with 40%% chance ($90,000 net income), Average with 30%% chance ($73,000 net income), or Weak with 30%% chance ($55,000 net income). Part A 1. What is the best expected value for Christaker and the corresponding decision using the Expected Monetary Value approach? $ 75000 Keep current job v 2. What is the expected value of perfect information (EVPI)? 61000 # Part B Christaker can hire Sandeep, a mathematical economist, to provide information regarding the state of the economy next year. Sandeep will either predict a Good or Bod economy, with probabilities 0.4 and 0.6 respectively. If Sandeep predicts a Good economy, there is a 0.6 chance of a Strong economy, and a 0.3 chance of an Average economy. If Sandeep's prediction is Bod, then the economy has a 0.46 chance of being Weak and 0.44 chance of being Average. 1. If Sandeep predicts Good economy, what is the expected value of the optimal decision? $ B1400 2. If Sandeep predicts Bad economy. what is the expected value of the optimal decision? 86420 3. What is the expected value with the sample information (EVwSl) provided by Sandeep? $ 72412 4. What is the expected value of the sample information (EVS) provided by Sandeep? -2580 5. If cost of hiring Sandeep is $2780, what is the best course of action for Christaker? Don't him Bandonp; post is less than EVE6. What is the efficiency of the sample information? Round %% to 1 decimal place
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