The owner of TMH Hospital wants to open a new facility in a certain area. He usually builds 25-, 50-, or 100-bed facilities, depending on whether anticipated demand is low, medium or high. On the basis of his past experience, the probabilities of low demand, Medium demand and high demand are estimated as 0.1, 0.4and 0.5 and the short-range payoffs in Rs are calculated as follows.
Demand Acts
Build 25 bed Build 50 bed Build 100 bed
Low 30,000 -20,000 -40,000
Medium 35,000 50,000 -10,000
High 40,000 55,000 75,000
1) What would be the best decision?
2) What is the value of Expected Value of Perfect Information?