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Question 1
ABC company is a leading firm of dry cleaners with branches in Delhi and the large
town in Western UP. The company has been thinking of setting up a new shop in
Agra, which already has a large number of dry cleaning shops, one of which is a
branch of a national company at par with the ABC. ABC is concerned about the
reaction of customers and potential customers to the opening of its branch in
Agra, and is of the opinion that one of the three possibilities can take place (i)
increased market share, (ii) no change in the present operations and (iii) a
reduced market share. The company assigns a value and probability to each of
these outcome as shown in below Table :
On the basis of the information given in table, determine the expected monetary value
of the decision to open the branch.
Question: 2
• The amount that the person will gain in each
combination of state of nature and action is shown in
the table. Probability for three states of nature are
given below:
• Find out the value of EP/EMV, EPPI (Expected Profit
with Perfect Information), EVPI (Expected Value of
Perfect Information)
• A research firm has agreed to conduct a survey to
provide the management with additional information
regarding the states of nature. It will charge Rs 12000
for undertaking this survey. Do you think that the
survey should be conducted.
Sate of Action A1 A2 A3
Nature
S1 25000 -7000 -18000
S2 30000 50000 -8000
S3 40000 25000 60000
State of S1 S2 S3
nature
Probabilities 0.3 0.5 0.2
Question: 3
• The following payoff table gives the most
accurate estimates of payoff for three alternative
course of action and the four possible states of
nature under condition of uncertainty.
• The probabilities are S1: 0.4, S2: 0.25, S3: 0.2 and
S4: 0.15. The question arises:
• What course of action should be recommended
in this situation?
• What is the expected value of perfect information
if the budget amount is 100.5
Action Sate of S1 S2 S3 S4
Nature
A1 125 100 70 20
A2 70 90 100 50
A3 150 120 60 -10
Binomial Probability Distribution
Basics and terminology
Binomial Distribution:-
The Binomial Distribution describes discrete , not
continuous, data, resulting from an experiment
known as Bernoulli process.
Slide
Notation(parameters) for Binomial
Distributions.
S and F (success and failure) denote two possible
categories of all outcomes.
Slide
Ques
• Find the chance of getting 3 success in 5 trails
when the chance of getting a success in on
trail is 2/3. (Ans- .33)
Ques
• Seven coins are tossed simultaneously. Using
the binomial distribution, find out the
probability of obtaining at least 5 heads. (Ans-
0.22)
Ques
• For a probability distribution the mean is 4
and the variance is 2. Find the probability of
getting
1. At least 2 success (Ans: .964)
2. At the most 2 success. (Ans: 0.1445)
Fit the binomial distribution for the
following data
X F
0 28
1 62
2 46
3 10
4 4
Fit the binomial distribution and
calculate the value of standard
deviation
X F
0 4
1 20
2 40
3 40
4 20
5 4