## 7

• June 25, 2021

7 question Not yet answered Marked out of 26.00 Flag question An airline company is planning to open a new route. They must choose which type of airplane to use on the route: Small or Large.Their profitability (costs, ticket income, different levels of airport prices, overbooking costs, etc.) depends on the demand for flights on that route: High Demand or Low Demand. If the demand is low, the small airplane yields a profit of 850 thousand dollars in the coming period, while a large one yields only 650 thousand dollars. In case of high demand, the small airplane results in 550 thousand dollars one yields 1000 thousand dollars. The company thinks there is 35% chance of high demand. There is a possibility t survey for 50 thousand dollars to get a prediction for the future demand in the coming period. These kind of surveys in the past have predicted high demand accurately(when the demand turned out to be high) 65% of the time. They have predicted low demand accurately(when demand turned out to be low) 85% of the time. oat is the nerce What is the percentage probability of Low demand?% What is the percentage probability that there will be Low demand given that the predicted Low demand?% What is the percentage probability that there will be High demand given that the survey predicted High demand?% In terms of expected value bow much profit can a company achieve if it follows the optimal strategy (which value is at the root of the decision tree)?\$ How much is the Expected Value with Original Information?\$ s the ma What is the maximum amount the company is willing to pay for this survey (EVSI)?\$ How much is the Expected value of Perfect Information(EVPI)?\$ • #### COST CALCULATOR

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