Quantative Methods Help

Jul 4th, 2014
RockCafe
Category:
Statistics
Price: $10 USD

Question description

Need help with the following:

In your own words, explain how to obtain the “expected value of perfect information” for any payoff table, which has probabilities associated with each state of nature. Then, provide an example, drawing from any of the payoff tables in Problems 1-17 in the back of Chapter 12. If no probabilities are given for the states of nature, then assume equal likelihood.

Problem:

A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment

Gasoline Availability

Investment

Shortage

Stable Supply

Surplus

Motel

$-8,000

$15,000

$20,000

Restaurant

$2,000

$8,000

$6,000

Theater

$6,000

$6,000

$6,000

Determine the best investment, using the following decision criteria.

  1. Maximax

  2. Maximin

  3. Mininmax regret

  4. Hurwicz (a=4)

  5. likelihood


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