What is the expected value with perfect information in the following decision table? States of Nature
$$\begin{array} { | c | c | c | }
\hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \
\hline \mathrm { p } & .6 & .4 \
\hline \text { Option } 1 & 200 & 300 \
\hline \text { Option } 2 & 50 & 350 \
\hline
\end{array}$$
A) 50
B) 200
C) 260
D) 300
E) 350

Question

What is the expected value with perfect information in the following decision table? States of Nature
$$\begin{array} { | c | c | c | } 
\hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \
\hline \mathrm { p } & .6 & .4 \
\hline \text { Option } 1 & 200 & 300 \
\hline \text { Option } 2 & 50 & 350 \
\hline
\end{array}$$
A) 50
B) 200
C) 260
D) 300
E) 350

Quizplus · Accepted Answer

The expected value with perfect information is the weighted average of the payoffs, where the weights are the probabilities of the states of nature. In this case, the expected value is:(0.6 * 200) + (0.4 * 350) = 260

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