Question
Samuel Knight is considering opening a print shop on Johnson Street, two blocks away from a local college. He has found a good location that
Samuel Knight is considering opening a print shop on Johnson Street, two blocks away from a local college. He has found a good location that attracts possible business. His options are to open a small shop, a medium shop, or no shop at all. The market for a print shop can be positive, average, negative compared to the area business climate. The probabilities for these three are 0.20 for a positive market, 0.50 for an average market, and 0.30 for a negative market. The net profit or loss figures for the medium, small, and no shops for the various market conditions are given in the table. Building no shop at all yields no loss and no gain.
Alternative | Positive Market | Average Market | Negative Market |
Small Shop | 75,000 | 25,000 | -40,000 |
Medium Shop | 100,000 | 35,000 | -60,000 |
No shop | 0 | 0 | 0 |
(Question B:) What is the EVPI?
(Question C:) Create a regret table for this case. What decision would you recommend Samuel based upon the minimax regret approach?
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