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Alternatives 1 (Favors A) 2 (Favors B) 3 (Favors Neither A nor B)
A $88 ($5) ($5)
B ($8) $156 ($8)
A and B $80 $151 ($13)
Neither A nor B $0 $0 $0

Regret Matrix

States of Nature
Alternatives 1 (Favors A) 2 (Favors B) 3 (Favors Neither A nor B)
A $0.0 $160.5 $5.0
B $95.0 $0.0 $7.5
A and B $7.5 $5.0 $12.5
Neither A nor B $87.5 $155.5 $0.0

A consulting firm has contacted your company claiming that their analysis conclusively indicates that the probability of the airport being built at location A is 0.50, the probability of the airport being built at location B is 0.30, and the probability of the airport being built at neither location A nor location B is 0.20 (i.e., they have perfect information regarding the probability of the airport being built at location A, location B or neither location A nor location B). The consultant has offered to share their analysis with your company for a fee of $25.0 million. What is the Expected Value of Perfect Information in this scenario?

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Statistics and Probability, Statistics

Category:- Statistics and Probability
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