SOLVE ONLY Q 16

SOLVE ONLY Q 16

16. In Exercise 15, suppose that sample information is available in the form of a random sample of consumers. For a sample of size one, (a) find the posterior distribution if the one person sampled will purchase the item, and find the value of this sample information; (b) find the posterior distribution if the one person sampled will not pur- chase the item, and find the value of this sample information; (C) find the expected value of sample information. 15. A store must decide whether or not to stock a new item. The decision depends on the reaction of consumers to the item, and the payoff table (in dollars) is as follows. PROPORTION OF CONSUMERS PURCHASING THE ITEM .10 .30 .40 .50 .20 Stock 100 -10 -2 12 22 40 DECISION Stock 50 -4 6 12 16 16 Do not stock 0 0 0 0 0 If P.10) = 2, P.20) = .3, P(.30) = .3, P(40) = .1, and P(.50) = .1, what decision should be made? If perfect information is available, find VPI for each of the five possible states of the world and compute EVPI