Purchase Solution

Statistics: Determining EMV & EOL for vendor at baseball stadium

Not what you're looking for?

Ask Custom Question

Q3. Determining EMV & EOL
A vendor at the a baseball stadium must decide whether to sell ice cream or soft drinks at today's game. The vendor believes that that the profit will depend on the weather. On the basis of her past experience at this time of year, the vendor estimates the probability of warm weather as 0.60 and cool weather as 0.40. The payoff table is as follows:

Action Probability
Sell Soft Drinks Sell Ice Cream
Cool weather $50 $30 0.40
Warm Weather $60 $90 0.60

A) Compute the Expected Monetary value (EMV) for each action.
B) Compute the Expected opportunity loss for each action
C) Compute the Return to Risk Ratio (RRR).
D) On the basis of the results of (A) - (C), which action should the vendor take - sell soft drinks or ice cream? Why?

Purchase this Solution

Solution Summary

The solution computes expected monetary value, expected opportunity loss, and return to risk ratio.

Solution Preview


EMV = SUM{probability*payoff}
EMV(soft drink) = (0.4)(50)+(0.6)(60)
EMV(ice cream) = (0.4)(30)+(0.6)(90)


Expected Opportunity ...

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.

Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

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.

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.