1. Decision Analysis Part II

Decision Analysis with Additional Information

Baye’s Theorem (Bayesian Analysis)

Decision Trees with Posterior Probabilities:

Dash out with two lines what you will not choose to dowrite the managerial statement based on this. the stuff highlighted is the decision strategy

EVSI = in this case the maximum amount we are willing to pay the analyst (additional information value - the value without the additional information)

  • can not have EVPI that is negative, you are either willing to pay something or pay nothing