Question
Humber Tech is considering starting either a small, regular, or large tech store in Etobicoke. The type of store they open depends on the city's
Humber Tech is considering starting either a small, regular, or large tech store in Etobicoke. The type of store they open depends on the city's market potential which may be high with 30% chance, medium with 30% chance, or low with 40% chance. The potential profits ($) in each case are shown in the payoff table below.
High | Medium | Low | |
---|---|---|---|
Small | 4600 | 4600 | 800 |
Regular | 5900 | 5100 | -600 |
Large | 7000 | 3600 | -100 |
Part B
Humber Tech is now considering hiring ALBION consultants for information regarding the city's market potential. ALBION Consultants will give either a favourable (F) or unfavourable (U) report. The probability of ALBION giving a favourable report is 0.4. If ALBION gives a favourable report, the probability of high market potential is 0.42 while the probability of a low market potential is 0.04. If ALBION gives an unfavourable report, the probability of high market potential is 0.14 and that of low market potential 0.54. 1. If ALBION gives a favourable report, what is the expected value of the optimal decision? $ 2. If ALBION gives an unfavourable report, what is the expected value of the optimal decision? $ 3. What is the expected value with sample information (EVwSI) provided by ALBION? $ 4. What is the expected value of the sample information (EVSI) provided by ALBION? $ 5. Based on the EVSI, should Humber Tech pay $440 for the sample information? Select an answer Yes, they should. No, they should not. 6. What is the efficiency of the sample information? Round % to 1 decimal place. %
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