In the SciTools example, the probabilities for the low bid of competitors, given that there is at least one competing bid, are currently 0.2, 0.4, 0.3, and 0.1. Let the second of these be p, and let the others sum to 1 - p but keep the same ratios to one another: 2 to 3 to 1. Use a one-way data table to see how (or whether) the optimal decision changes as p varies from 0.1 to 0.7 in increments of 0.05. Explain your results.
Answer to relevant QuestionsFor the example in Simple Decision Problem.xlsx, we found that decision D3 is the EMV-maximizing decision for the given probabilities. See whether you can find probabilities that make decision D1 the best. If the ...In a tree built with Precision Tree, there are two blue values at each end node, the top one of which is a probability. Why are so many of these probabilities 0 in the finished tree in Figure 6.9? What do the remaining ...In the drug testing, assume there are three possible test results: positive, negative, and inconclusive. For a drug user, the probabilities of these outcomes are 0.65, 0.06, and 0.29. For a nonuser, they are 0.03, 0.72, and ...Following up on the previous problem, the expected net gain from information is defined as the expected amount gained by having access to the information, at its given cost, as opposed to not having access to the ...Do the absolute magnitudes of the monetary outcomes matter in the risky venture example? Consider the following two possibilities. In each case, multiply all monetary values in the example by a factor of A. a. Currently, an ...
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