Quantative Methods Help
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.
-
Maximax
-
Maximin
-
Mininmax regret
-
Hurwicz (a=4)
-
likelihood
