Show all work for complete credit. The owner of Tasty Cookies needs to decide wh
ID: 1198131 • Letter: S
Question
Show all work for complete credit.
The owner of Tasty Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimated that monthly profits will vary with demand for her cookies as follows:
Demand
Size of Outlet Low High
Small $1,000 1,000
Medium 500 2,500
Large 0 3,000
What is her expected value of perfect information (EVPI)?
Explanation / Answer
For small demand is low, for medium the demand may be low or high, for large the demand is high
By
Nishant Bhatt