Purchase Solution

Calculate the best expected pay off (EMV).

Not what you're looking for?

Ask Custom Question

Suppose a product needs to be marketed, but the manufacturer can make the product in three ways using any one of the three designs. There are three categories of market conditions and they occur with the probabilities given in the following table:

Design
Market condition

I with probability 0.5
II with probability 0.3
III with probability 0.2

A
$30
$15
$10

B
$15
$20
$15

C
$5
$10
$40

Calculate the best expected pay off (EMV). For which design is the EMV maximum? Calculate the EVPI, and the value of perfect information.

Attachments
Purchase this Solution
Solution Summary

The solution calculates the expected payoff for a manufacturer. Products that need to be marketed are determined.

Solution Preview

Suppose a product needs to be marketed, but the manufacturer can make the product in three ways using any one of the three designs. There are three categories of market conditions and they occur with the probabilities given in the following table:
Design Market condition
I with probability 0.5 II with ...

Solution provided by:
Changping Wang, MA
Education
  • BSc , Wuhan Univ. China
  • MA, Shandong Univ.
Recent Feedback
  • "Your solution, looks excellent. I recognize things from previous chapters. I have seen the standard deviation formula you used to get 5.154. I do understand the Central Limit Theorem needs the sample size (n) to be greater than 30, we have 100. I do understand the sample mean(s) of the population will follow a normal distribution, and that CLT states the sample mean of population is the population (mean), we have 143.74. But when and WHY do we use the standard deviation formula where you got 5.154. WHEN & Why use standard deviation of the sample mean. I don't understand, why don't we simply use the "100" I understand that standard deviation is the square root of variance. I do understand that the variance is the square of the differences of each sample data value minus the mean. But somehow, why not use 100, why use standard deviation of sample mean? Please help explain."
  • "excellent work"
  • "Thank you so much for all of your help!!! I will be posting another assignment. Please let me know (once posted), if the credits I'm offering is enough or you ! Thanks again!"
  • "Thank you"
  • "Thank you very much for your valuable time and assistance!"
Purchase this Solution
Free BrainMass Quizzes
Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.

Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.

Know Your Statistical Concepts

Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.

Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

View More Free Quizzes
Related BrainMass Solutions

  • Decision Theory

    The Expected Pay of due to Courses of action is given by the formula The Expected Monetary value EMV (Course of Action Sj ) = Where Pj = Probability of occurrence of state of Nature i Pij =Pay off associated with state of nature Ni course of

  • Decision Tree Analysis

    This is the initial decision and is based on the fact that the small store option is profitable at the end of first year. (The pay off or EMV for conducting of survey node is: $ 4000 profit.

  • Quantitative Methods

    Put your answer in the form x.x First, you need to calculate the Expected Monetary Value (EMV) for each alternative by multiplying the result with the probability of each state.

  • Payoff Table and Optimal Strategy

    For EMV criterion we choose the one with highest EMV, that is S (solar only). d. We now calculate EVPI (expected value of perfect information) Using EPC and EMV. We calculate EPC.

  • Optimal Decision and Expected Value of Perfect Information

    S=State of Nature D=Decision alternatives First, you need to calculate the Expected Monetary Value (EMV) for each alternative by multiplying the result with the probability of each state.

  • Decision trees and EMV

    204327 Decision trees and EMV: What is the best choice for the company? It is projected that a needed item will sell for $10 each.

  • BP has three potential sites where it can build a drilling rig

    Provide decision trees for each question below along with answers 1) Calculate the EMV 2) How much would the company be willing to pay for perfect information on all three sites (together)?

  • Calculating EMV, and maximizing EMV from a few alternatives

    22211 A) Calculate the EMV of the two latter alternatives. b) Construct a decision tree of the product manager's decision and identify the course of action that maximizes EMV.

  • Quantitative analysis and demand

    The pay-off table for the problem is given below.

View More Related Solutions