How much is the expected monetary payoff with perfect information in Problem 19.5? From this answer and the decision reached in Problem 19.6, what is the value of perfect information?

Data from problem 19.5

Use the following decision table to construct a decision tree.

Data from problem 19.6

Suppose the probabilities of the states of nature occurring for Problem 19.5 are s₁ = 0.15, s₂ = 0.25, s₃ = 0.30, s₄ = 0.10, and s₅ = 0.20. Use these probabilities and EMVs to reach a conclusion about the decision alternatives in Problem 19.5.

Transcribed Image Text:

d₁ Decision d₂ Alternative d3 $1 50 75 15 State of Nature $2 20 50 12 $3 15 20 10 S4 55∞0 -5 8 $5 1 -20 6