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- March 6, 2017 at 3:23 pm #375998
Dear Sir,
Please could you clarify the below point for me.
In the September 2016 exam there is the following question:19: The human resources department has offered to undertake some research to help Mylo to predict the number of employees who will require lunch in the cafeteria each day. This information will allow Mylo to prepare an accurate number of lunches each day.
What is the maximum amount which Mylo would be willing to pay for this information (to the nearest whole $?Mark scheme is as follows:
Expected value with perfect information = (0·15 x $1,170) + (0·30 x $1,612) + (0·40 x $2,015) + (0·15 x $2,496) = $1,839·50
Expected value without perfect information would be the highest of the expected values for the supply levels = $1,648·25 (at a supply level of 775 lunches).So I understand the calculation for perfect information (best outcomes times by the probability of that outcome) what I don’t understand is the figure for ‘without perfect information’. I can see its been done based on supply of 775 lunches to reach the figure but I don’t understand why? Why has that level of supply been chosen?
Thanks
March 6, 2017 at 4:07 pm #376019If they don’t have perfect information then they would choose however many lunches gave the highest expected value. This is 775 lunches giving and expected value of 1648.25.
Have you watched my free lectures on this?
The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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