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Trigeoscal
Trigeoscal, Master's Degree
Category: Calculus and Above
Satisfied Customers: 530
Experience:  Math Homework, Pre Calculus and Calculus and Above
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A group of friends are planning a recreational outing

Customer Question

A group of friends are planning a recreational outing and have constructed the following payoff table to help them decide which activity to engage in. Assume that the payoffs represent their level of enjoyment activity under the various weather conditions.

Weather
Cold Warm Rainy
S1 S2 S3
Bike: A1 10 8 6
Hike: A2 14 15 2
Fish: A3 7 8 9

If the probabilities of cold weather (S1), warm weather (S2), and rainy weather (S3) are 0.2, 0.4, and 0.4, respectively, what is the EVPI situation?

Submitted: 4 years ago.
Category: Calculus and Above
Expert:  Trigeoscal replied 4 years ago.

EV|PI = 0.2*14 + 0.4*15 + 0.4*9 = 12.4
EMV = 14*0.2 + 15*0.4 + 2*0.4 = 9.6
EVPI = EV|PI - EMV
EVPI = 12.4 - 9.6
= $2.8