What is the expected monetary value of a shipment plan

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Reference no: EM133231985

Assignment:

It is 2030 and contaminated livestock being imported to the country has become a massive problem. The government is trying to decide whether livestock shipments from a particular country should be tested for a contagious disease that is endemic to that country. Part of the decision rests on potential impacts to the Canadian economy. Each livestock shipment imported into Canada that has the disease will cost the economy $100,000. Each healthy animal shipment admitted will contiibute $10,000 to the economy. Assume that 10% of all potential animal shipments have the disease. The government can admit all shipments, admit no shipments or it can test the animals in the shipment for the disease before making the admission decision. It costs $100 to test a shipment for the disease and the test result is either positive or negative. A shipment that is disease free always tests negative. However, 20% of all diseased shipments test negative for the disease (false negative). The government's goal is to maximize the net value to the economy.

a) Decide upon the best course of action using a decision tree to outline the decision problem.

b) What is the expected monetary value of a shipment given your plan? What is the expected value of the test (EVSI)?

c) What is the expected value of perfect information (EVPI) for this situation?

Reference no: EM133231985

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