What is the efficiency of the sample information

Reference no: EM133576943

Hugh can hire Lion, a business analyst, to provide information regarding the state of the economy next year. Lion will either predict a Good or Bad economy, with probabilities 0.5 and 0.5 respectively.

If Lion predicts a Good economy, there is a 0.42 chance of a Strong economy, and a 0.46 chance of an Average economy.

If Lion's prediction is Bad, then the economy has a 0.52 chance of being Weak and 0.4 chance of being Average.

Draw a decision tree that represents this decision problem using Decision Tree in Excel QM and answer the following questions:

If Lion predicts Good economy, what is the chance of a Weak economy?

2. If Lion predicts Bad economy, what is the chance of a Strong economy?

3. If Lion predicts Good economy, what is the expected value of the optimal decision?

4. If Lion predicts Bad economy, what is the expected value of the optimal decision?

5. What is the expected value with the sample information (EVwSI) provided by Lion?

6. .What is the expected value of the sample information (EVSI) provided by Lion?

7. If cost of hiring Lion is $495, what is the best course of action for Hugh?

8. If cost of hiring Lion is $1,000, what is the best course of action for Hugh?

9. What is the efficiency of the sample information? Round the answer to the nearest percent.

Reference no: EM133576943

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