Question
Problem 1 (Decision Trees and Value of Information). NovelTech is a high-tech company dedicated to technological innovations. The company is trying to decide whether or
Problem 1 (Decision Trees and Value of Information). NovelTech is a high-tech company dedicated to technological innovations. The company is trying to decide whether or not to develop a new product. It is estimated that, with a probability of 40%, this product will be a major success with an estimated profit of $400 million; with a probability of 30% the product will break even; and with a probability of 30% it will be a total failure and will cost the company $600 million. A). What is the standard deviation of the payoff of the optimal decision strategy? Solve with and without including the expert's fee. What is the difference?
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