The EMV of a Decision with Three States of Nature

question 18

Essay

The EMV of a decision with three states of nature is $50. If the profit/value of A is 1/3 of B and B is 1/3 of C, determine the profit from A if B and C have an equal chance of occurring that combined is twice the chance of A occurring.

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Definitions:

Football Draft

Football Draft is an event in professional American football where teams select eligible college football players to add to their rosters, based on an ordering system that typically rewards teams with poorer performance records.

Randomness

The lack of pattern or predictability in events.

Probability

A measure indicating how likely it is that an event will occur, expressed as a number between 0 (impossible) and 1 (certain).

Distribution

Refers to the way in which values of a variable or a set of data are spread or distributed across possible values or intervals.