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Start Right Corporation Case Study Solution

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DISCUSSION QUESTIONS

1. The purpose of this question is to make students use a personal experience to distinguish between good and bad decisions. A “good” decision is one that is based on logic and all available information. A “bad” decision is one that is not based on logic and all available information. It is possible for an unfortunate or undesired outcome to result from a “good” decision (witness a patient expiring after open-heart surgery). It is also possible to have a favorable or desirable outcome result from a “bad” decision (you win at Blackjack, even though you drew a card when you already held an “18”).

2. An alternative is a course of action over which we have control. A state of nature is an event or occurrence over which we have no control. An example of a choice between alternatives is our decision as to whether or not to carry an umbrella to work today. The relevant state of nature is whether or not it will rain.

3. A decision table for Jenine Duffey might look like the following:

Recession Inflation Recession and Inflation Invest in Process #1 Invest in Process #2 Invest in Process #3

4. EMV is defined as the expected monetary value. The EMV is the expected or average return that we would realize if we were to repeat the decision an infinite number of times. “Expected value under certainty” is the expected or average return that we would realize if we were to repeat the decision an infinite number of times, each time having “perfect” or complete information and making the “best” possible decision based on that information. EVPI is defined as the expected value of perfect information. EVPI is equal to the difference between EMV (the expected or average return given that we were to make the decision based on current or available information) and “expected value under certainty” and is the maximum amount we

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