Consider an oil-wildcatting problem

Assignment Help Operation Management

Reference no: EM13968327

Consider an oil-wildcatting problem. A decision maker has mineral rights on a piece of land that he believes may have oil underground. There is a 30% chance that the decision maker will strike oil if he drills. If he drills and strikes oil, then the net payoff is $180,000. If he drills and does not strike oil, then there will be a $10,000 loss due to the sunk cost. The alternative is not to drill at all, in which case the decision maker's net payoff is $0. Before the decision maker drill he might consult a geologist who can assess the promise of the piece of land. The geologist can tell the decision maker whether the decision maker's prospects are "good" or "poor". But she (the geologist) is not a perfect predictor. If there is oil, the conditional probability is 0.9 that she will say good. If there is no oil, the conditional probability is 0.85 that she will say poor. What is the maximum amount that the decision maker (assume he is rational) is willing to pay the geologist for her information? (Calculate EVSI.)

Reference no: EM13968327

Questions Cloud

Implement the closest-pair algorithm : 1. Write a program to implement the closest-pair algorithm. 2. What is the asymptotic running time of quickselect using a median-of-median-of- three partitioning strategy?

What fact or piece of information did you learn that was new : Take the "Find Your Fit" assessment under "The profession" menu along the left hand side. What does it suggest as "you early career" type, if you were to go into the accounting field?

Method for constructing the header of size : Part of the encoded ?le must be a header indicating the Huffman code. Give a method for constructing the header of size at most O(N) (in addition to the symbols), where N is the number of symbols. Complete the proof that Huffman's algorithm generates..

What are benefit of federal and state social welfare program : What are the benefits of federal and state social welfare programs today? What are the drawbacks? What experiences have you, or someone you know, had with a social welfare program?

Consider an oil-wildcatting problem : Consider an oil-wildcatting problem. A decision maker has mineral rights on a piece of land that he believes may have oil underground. There is a 30% chance that the decision maker will strike oil if he drills. If he drills and strikes oil, then the ..

Completion time for multiprocessor : 1. Show that the greedy algorithm to minimize the mean completion time for multiprocessor job scheduling works. 2. The input is a set of jobs j1, j2, ... , jN, each of which takes one time unit to complete. Each job jiearns di dollars if it is comple..

Determine the electric potential energy of the initial state : There is the information and then the questions: A stationary block has a charge of +6.0×10-4 C. A 0.80-kg cart with a charge of +4.0×10-4 C is initially at rand separated by 4.0 m from the block. The cart is released and moves along a frictionles..

Identify a domestic and an international terrorist incident : Identify a domestic and an international terrorist incident. Discuss the differences and similarities between the groups involved and the tactics that are employ in these incidents.

Find L-W-Lq-wq and the probabilities : Goofy owns and manages a hot dog stand near Walt Disney World. Although Goofy can serve 30 customers per hour on average (μ), he only gets 20 customers per hour (λ). Because Goofy could wait on 50% more customers than actually visit his stand, it doe..

User Account

All Pages