Exam 15: Making Decisions With Uncertainty

You want to run a difference-in-difference experiment with a price increase for the bacon cheeseburger item on your menu.If you are worried about "leakage" with your control group,a good comparison menu item would be

​A manager may over-research the appropriateness of a decision

Wellness Experiment Old Republic Title Insurance Company noticed that its sedentary clerical workers were gaining weight,developing diabetes,and potentially leading to increases in their health insurance costs.It developed a wellness program in which participating employees could consult with trainers,nutritionists and dieticians about healthier lifestyle choices with the goal of increasing the number of employees with a Body Mass Index (BMI)of 30 or lower within a year.In addition,in some locations,it also provided $1,000 bonuses to test role of financial incentives.In the locations without the incentive,at the average location,52.4% of the participating employees met the goal before the plan and 56.2% after.In the locations with the incentive plan,57.1% met the goal before and 62.7% met it afterward.What is the diff-in-diff estimate of the effect of the financial incentives?

​Half of all your potential customers would pay $16 for your product but the other half would only pay $10.You cannot tell them apart.Your marginal costs are $4.If you set the price at $16,the expected profit is:

​In a coin toss bet,where both heads and tails are equally likely,you win a dollar on heads but lose a dollar on tails.The expected value of the bet is

​If a deal looks too good to be true

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $50 to play,would an individual gain or lose from playing the game

​A "false negative" is

​Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $10,$20,$30,and $40 respectively.The expected value is:

You want to run a difference-in-difference experiment with a price increase for your lawn chairs in Miami,FL.If you are worried about the "representativeness" of your control group,a good comparison city would be

​Half of all your potential customers would pay $10 for your product but the other half would only pay $8.You cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

​Half of all your potential customers would pay $10 for your product but the other half would only pay $8.You cannot tell them apart.Your marginal costs are $4.If you set the price at $8,the expected profit is:

​Fashion Buyers I A buyer for a department store must decide on which designs the stores will carry before he knows what the demand will be in the coming season.Choosing a poorly demanded design means lots of unsold merchandise and losses that are $200,000 on average.Passing on a highly demanded design means unsold merchandise and missing out on profits that are $300,000 on average.What probability of a design's success should he be in order to choose to carry it?

​Four possibilities are equally likely and have payoffs of $2,$4,$6,and $8.The expected value is:

Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $80,$30,$0,and -$80 respectively.The expected value is:

You want to run a difference-in-difference experiment with a price increase for your lawn chairs in Miami,FL.If you are worried about "leakage" with your control group,a poor comparison city would be

​You can invest $100,000 into either project A or B.You estimate that A would succeed with a probability of 0.5 in which case it doubles in value.If it fails,its scrap value is $50,000.Project B would succeed with probability 0.8,in which case it would have a value of $150,000.If it fails,project B's scrap value is $30,000.Which project should you invest in?

​Five possibilities are equally likely and have payoffs of $2,$4,$6,$8,and $10.The expected value is:

​Expected value is

​Use the following information for question Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million. -​What is the expected revenue from developing the simplified software?