Show the expected monetary value at each step

Reference no: EM13167703

An art dealer has a client who will buy the masterpiece Rain Delay for $50,000.

The dealer can buy the painting now for $40,000 (making a prot of $10,000). Alternatively, he can wait one day, when the price will go down to $30,000. The dealer can also wait another day when the price will be $25,000. If the dealer does not buy by that day, then the painting will no longer be available. On each day, there is a 0.60 chance that the painting will be sold elsewhere and will no longer be available.

(a) Draw the decision tree.Show the Expected Monetary Value at each step? What strategy maximizes the dealer's profit?

(b) What is the Expected Value of Perfect Information value the dealer would place on knowing when the item will be sold

(c) What strategy should be selected if the probability that the painting will be sold is changed to 0.50 from 0.60. Please draw the decision tree to come to the conclusion

Reference no: EM13167703

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