BUS 220 Study Guide - Final Guide: Expected Value Of Perfect Information

• School: Stony Brook University
• Department: Business Management
• Course: BUS 220
• Professor: Jadranka Skorin- Kapov

Document Summary

Jim has been employed at gold key realty at a salary of ,000 per month during the past year. Over the past year, jim has sold up to 6 homes in a month. a) b) Compute the monthly salary payoff table for jim. For this payoff table find jim"s optimal decision using: (1) the conservative approach, (2) minimax regret approach, (3) optimistic approach. Suppose that during the past year the following is jim"s distribution of home sales. If one assumes that this is a typical distribution of jim"s monthly sales, which salary should jim select? c) There are three decision alternatives (salary plans) and seven states of nature (the number of houses sold monthly). 0: use the relative frequency method for determining the probabilities. Using the ev approach: ev(plan i) = 2500, ev(plan ii) = 3050, ev(plan iii) = 3417;