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Consider the following payoff table. How much should be paid for a perfect forecast of the State of nature?
Expert Answer
| A | B | EMV | |
| Alternative 1 | 100 | 150 | 130 |
| Alternative 2 | 200 | 100 | 140 |
| Probability | 0.4 | 0.6 |
Max(EMV) = 140
EVPI = Expected Value with Perfect Information – max(EMV) = (200*0.4 + 150*0.6) – 140 = 30
