1. Advertising strategies EVPI.
a) For the advertising strategies of Exercise 25 and using the probability of 0.70 for rising consumer confidence, what is the Expected Value of Perfect Information (EVPI)?
b) What is the EVPI if the probability of rising consumer confidence is only 0.40?
2. Energy investment EVPI. For the energy investment of Exercise 26 and using both of the probabilities considered in that exercise, find the Expected Value of Perfect Information.
3. Advertising strategies with information. The company from Exercises 17, 25, and 27 has the option of hiring an economics consulting firm to predict consumer confidence. The company has already considered that the probability of rising consumer confidence could be as high as 0.70 or as low as 0.40. They could ask the consultants for their choice between those two probabilities, or they could just pick a probability in the middle, such as .50, and choose a strategy based on that.
a) Draw the decision tree including the decision to hire the consultants.
b) Would the consultants' information be useful? Explain.
c) The company thinks there's an equal chance of either of the consulting alternatives being what the consultants re- port. What's the value to the company (per customer) of the extra information?