Question

A newspaper boy has the following probabilities of selling magazines: Number of copies sold: 10, 11, 12, 13 Probabilities: 0.15, 0.2, 0.4, 0.25 The cost of a copy is 2 Rs and the sale price is 5 Rs. He cannot return unsold copies. How many should he order using the "Expected value for perfect information"? Prove that EVPI = min E.O.L.

Name: a newspaper boy has following probabilities of selling magazine no of copies sold 10 11 12 13 probabilities 015 02 04 025 cost of copy is 2 rs and sale is 5 rs he cannot return unsold copies 59978
Uploaded: 2023-01-08T05:33:13-08:00
Duration: 3 min 44 s
Channel: Nick Johnson
Description: a newspaper boy has following probabilities of selling magazine no of copies sold 10 11 12 13 probabilities 015 02 04 025 cost of copy is 2 rs and sale is 5 rs he cannot return unsold copies 59978

          A newspaper boy has the following probabilities of selling magazines:
Number of copies sold: 10, 11, 12, 13
Probabilities: 0.15, 0.2, 0.4, 0.25
The cost of a copy is 2 Rs and the sale price is 5 Rs. He cannot return unsold copies. How many should he order using the "Expected value for perfect information"? Prove that EVPI = min E.O.L.

Added by Gabriel S.

Elementary Statistics a Step by Step Approach

Allan G. Bluman 9th Edition

Instant Answer

Solved by Expert Nick Johnson

01/08/2023

Step 1

If he orders 10 copies, he will sell all of them for sure. So, the expected profit is (5-2)*10 = 30 Rs. If he orders 11 copies, he will sell 10 copies with a probability of 0.15 and 11 copies with a probability of 0.85 (0.2+0.4+0.25). So, the expected profit is Show more…

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A newspaper boy has the following probabilities of selling magazines: Number of copies sold: 10, 11, 12, 13 Probabilities: 0.15, 0.2, 0.4, 0.25 The cost of a copy is 2 Rs and the sale price is 5 Rs. He cannot return unsold copies. How many should he order using the "Expected value for perfect information"? Prove that EVPI = min E.O.L.