A group of investors wants to open up a jewelry store in a new shopping center.The investors are trying to decide whether to stock the store with inexpensive jewelry,medium-priced jewelry,or expensive jewelry.The probability of their choice depends upon the economic conditions.The payoff table below gives the anticipated profits for different states of the economy.The probability of prosperity is 0.5.
a.Determine the expected value of each alternative and indicate which decision alternative is the best.
b.Determine the expected value with perfect information about the states of nature.
c.Determine the expected value of perfect information.
Definitions:
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