Calculate the EVSI.
Explanation of Solution
The EMV of 25 calls is 50,000, EMV of 50 calls is 45,000
The terms I1 small number of calls, I1 indicates the medium number of calls and I2 indicates the large number of calls.
Table 1 shows that the posterior probabilities for I1.
Table 1
sj | P(sj) | |||
s1 | 0.5 | 0.8667 | 0.4333 | 0.8792 |
s2 | 0.25 | 0.2202 | 0.0551 | 0.1117 |
s3 | 0.25 | 0.018 | 0.0045 | 0.0091 |
Total | 0.4929 |
Table 2 shows that the posterior probabilities for I2.
Table 2
sj | P(sj) | |||
s1 | 0.5 | 0.1334 | 0.0667 | 0.1601 |
s2 | 0.25 | 0.7527 | 0.1882 | 0.4519 |
s3 | 0.25 | 0.6461 | 0.1615 | 0.3879 |
Total | 0.4164 |
Table 3 shows that the posterior probabilities for I3.
Table 2
sj | P(sj) | |||
s1 | 0.5 | 0 | 0 | 0 |
s2 | 0.25 | 0.027 | 0.0068 | 0.0745 |
s3 | 0.25 | 0.3359 | 0.084 | 0.9254 |
Total |
The EMV value of 25 calls with I1 is 50,000.
The EMV value of 50 calls (a2) with I1 can be calculated as follows.
The value of EMV of a2 is 33,624.
The EMV value of 100 calls (a3) with I1 can be calculated as follows.
The value of EMV of a3 is 22,780. Since the EMV value of 25 calls is greater, select the option 25 calls.
The EMV value of 25 calls with I2 is 50,000.
The EMV value of 50 calls (a2) with I2 can be calculated as follows.
The value of EMV of a2 is 55,191.
The EMV value of 100 calls (a3) with I2 can be calculated as follows.
The value of EMV of a3 is 52,310. Since the EMV value of 50 calls is greater, select the option 50 calls.
The EMV value of 25 calls with I3 is 50,000.
The EMV value of 50 calls (a2) with I3 can be calculated as follows.
The value of EMV of a2 is 60,000.
The EMV value of 100 calls with I3 can be calculated as follows.
The value of EMV of a3 is 77,012. Since the EMV value of 100 calls is greater, select the option 100 calls.
The EMV value can be calculated as follows.
The value of EMV is 54,612.
The EVSI value can be calculated as follows.
The value of EVSI is 4,612.
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Chapter 22 Solutions
Statistics for Management and Economics (Book Only)
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