Question: Num 3 2. Refer to Problem 1. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low

Num 3

2. Refer to Problem 1. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P( low )=.3 and P( high )=.7. a. Determine the expected profit of each alternative. Which alternative is best? Why? b. Analyze the problem using a decision tree. Show the expected profit of each alternative on the tree. c. Compute the expected value of perfect information. How could the contractor use this knowledge? 3. Refer to Problems 1 and 2. Construct a graph that will enable you to perform sensitivity analysis on the problem. Over what range of P( high) would the alternative of doing nothing be best? Expand? Subcontract

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