Using the probabilities of a new bridge and .40 for new bridge
a. Compute the expected value of each alternative in the payoff table, and identify the alternative that would be selected under the expected – value approach.
b. Construct a decision tree for the problem showing expected values.
New Bridge Built | No New Bridge | ||
Alternative capacity | A | 1 | 14 |
for new store | B | 2 | 10 |
C | 4 | 6 |
where A= small, B = medium, and C= large