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The Quality Control Manager for NKA Inc

Question 30

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The quality control manager for NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)an incoming shipment (lot)of microchips.The historical data indicate that there is a 30 percent chance that the lot is poor quality (S1),50 percent chance that the lot is fair quality (S2),and 20 percent chance that the lot is good quality (S3).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. The quality control manager for NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)an incoming shipment (lot)of microchips.The historical data indicate that there is a 30 percent chance that the lot is poor quality (S<sub>1</sub>),50 percent chance that the lot is fair quality (S<sub>2</sub>),and 20 percent chance that the lot is good quality (S<sub>3</sub>).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. What is the maximum amount that the quality control manager would be willing to pay for perfect information? What is the maximum amount that the quality control manager would be willing to pay for perfect information?

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EVPI = 21
Expected payoff under certaint...

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