Question: A professor has developed a payoff table that indicates the payoffs associated with a set of alternatives under two possible states of nature. Tenure Fired

A professor has developed a payoff table that indicates the payoffs associated with a set of alternatives under two possible states of nature.

Tenure Fired
Teach at another university $120,000 $20,000
Apply for the dean's job $40,000 $180,000
Go into industry $30,000 $250,000

Compute the expected value of perfect information assuming that the probability of being fired is equal to 0.4.

A

EVPI = $54,000
B

EVPI = $64,000

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