Business Statistics

Chapter 19 | Statistical Decision Theory 751

7. For Problem 1, use expected value of perfect information

(EVPI) to select the best act. The probabilities of different

events given in Problem 5 can be used to compute expected

value of perfect information (EVPI).

8. A leading multinational oil company is in the process of

deciding whether to go in for an oil well drilling contract. If

this multinational company bids, the value will be Rs 700

million with 75% chance of obtaining the contract. It has

the option of going for a new drilling operation or using its

existing successful operation. The table below exhibits the

probability of success ...