The EMV of a decision with three states of nature is $50. If the profit/value of A is 1/3 of B and B is 1/3 of C, determine the profit from A if all three states of nature are equally likely to occur
What will be an ideal response?
The total payoff is simply the average of the three payoffs or 1/9 + 1/3 + 1 = 13/27 if the value of C is 1. Solving for 13/27 ? C = 50 gives C = $103.85. Thus A = $11.54.
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