Alternatives 1 and 2 in the Following Payoff Table Represent

question 23

Short Answer

Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (S_I) represent the levels of demand for the company products. s₁, s₂, and s₃ characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. Prior probabilities are .3 for s₁; .6 for s₂, and .1 for s₃.
What is the maximum amount that the company would be willing to pay for perfect information?

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Definitions:

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