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    Optimal Decision and Expected Value of Perfect Information

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    Problem 4
    In the following profit payoff table for a decision problem with two states of nature and three decision alternatives, the probabilities for s1 and s2 are: p(s1)=0.8 and p (s2)= 0.2

    S=State of Nature
    D=Decision alternatives
    S1 S2
    d1 15 10
    d2 10 12
    d3 8 20

    a. What is the optimal decision?
    b. Find the EVPI (expected value of perfect information)

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    Solution Preview

    Problem 4
    In the following profit payoff table for a decision problem with two states of nature and three decision alternatives, the probabilities for s1 and s2 are: p(s1)=0.8 and ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the optimal decision and calculate the EVPI.

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