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Determine the expected cost of saving a life by implementing a policy requiring everyone over 50 to be screened every year.
Explain in your own words the idea of subjective probability. Explain in your own words the difference between assessing the probability.
Comment also on the subjective judgments that a bank officer would have to make in using your friend's model.
What is different about assessing probabilities regarding your own performance as compared to assessing probabilities for outcomes like those in Problem 8.6.?
In particular, he would have had to judge ratio of these two probabilities. Based on previously stated prior and posterior probabilities, what is that ratio?
Assess these fractiles for the following uncertain quantities: 0.05 fractile, 0.25 fractile. Plot your assessments to create graphs of your subjective CDFs.
What advantages do subjective probability distributions have over typical point forecasts? What disadvantages?
Create and solve a complete decision tree representing Steve's decision. Why is it that Steve cannot accept the Banana offer as it stands?
What is the relationship between stochastic dominance and expected value? If alternative A dominates alternative B, then is it always true that EV(A) is better?
Discuss the pros and cons of using EMV as a decision selection criterion, especially for one-off decisions.
Build a linked-tree in PrecisionTree to determine if they should order 12,000, 15,000, or 18,000 mugs. Be sure that your model does not allow Farbucks to sell.
If the investor waits, what could happen? What are the tradeoffs that the investor has to make in deciding whether to wait or to purchase the complex now?
Why might Liedtke want to accept the $2 billion anyway? If you were Liedtke, what is the smallest offer from Texaco that you would accept?
If you were advising Junior Larry, would you recommend that he take the settlement or have the lawyers continue the case?
What roles do the two diagrams play in helping to understand and communicate the structure of this decision?
Develop influence diagram and decision tree using PrecisionTree for situation. What roles do two diagrams play in helping to understand structure of decision?
Structure it using a decision tree using PrecisionTree. What would you recommend they do? Why?
Structure Jameson's decision using a decision tree. What would you recommend he do? Why?
Calculate the net values at the ends of the branches.
Construct cumulative risk profiles for the three alternatives, assuming Apricot has a 25% chance of winning the lawsuit. Can you draw any conclusions?
Create a graph that shows the regions for which the different job offers are optimal (have the highest expected overall score).
What do you think Fred should do? Why? (This case will require you to make certain assumptions in order to do a complete analysis.
Describe the role that sensitivity analysis could play in your friends' decision. What variables could be subjected to sensitivity analysis?
What kinds of issues are important in deciding whether to buy a retail business?
Under what circumstances would renting with an option be a dominated alternative? Under what circumstances would it definitely not be dominated?