The Alternatives 1 and 2 in the Following Payoff Table

question 34

Essay

The 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. The management believes that the weather conditions significantly affect the level of demand.48 monthly sales reports are randomly selected.These monthly sales reports showed 15 months with high demand,28 months with medium demand,and 5 months with low demand.12 of the 15 months with high demand had favorable weather conditions.14 of the 28 months with medium demand had favorable weather conditions.Only 1 of the 5 months with low demand had favorable weather conditions.Based on this information,the prior probabilities have been revised.If the weather conditions are favorable,P(S₁)= .4286,P(S₂)= .5357,and P(S₃)= .0357,and if the weather conditions are poor,P(S₁)= .1364,P(S₂)= .6818,and P(S₃)= .1818.It is also determined that the probability of favorable weather is 0.56 and the probability of poor weather is 0.44.
Determine the expected value of sample information.What is the maximum amount that the company is willing to pay for the weather information and the additional analysis?

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Definitions:

Economic Disturbances

Events or factors that disrupt the normal functioning of an economic system, potentially leading to economic instability or crisis.

Demographic Disturbances

Variations or changes in the demographic characteristics of a population that can affect social, economic, and political structures.

Job-Centered Identity

An individual's sense of self-worth and personal identity that is significantly influenced by their profession or career and the roles they perform within it.

Change Process

The series of actions or steps undertaken to achieve a significant difference in the way a situation, system, or organization functions.