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What is the expected value of perfect information for bakery

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A bakery makes fresh donuts every morning. The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning, how many donuts to make that day. The bakery has created the following payoff table to summarize the situation.

Alternative Demand for donuts (State of Nature) (number to produce)

                           High           Moderate            Low

Make few        100              100                100

Made medium   250              225               -20

Make many     350             150                     -50

It estimates the following probabilities for the respective levels of demand.

High               Moderate           Low

0.4                 0.4                   0.2

Problem 1: What is the expected value of perfect information for the bakery (EVPI)?

Reference no: EM132785250

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