University of Tunis Fall 2023

Tunis Business School

Decision & Game Theory

Tutorial 3 - Solutions

Question 1

0,1 0,9
HD NHD P(HD/" ") P(NHD/" ")
"HD" 0.9 0.05 0.09 0.045 0.135 0.67 0.33
"NHD" 0.1 0.95 0.01 0.855 0.865 0.01 0.99
Probability= 0.67

Question 2
1. Conducting a successful project.
2.

Success (0.7)
250000
175000

Failure (0.3) 0
H2020

110000 Satisfactory (0.6)

130000
Erasmus
80000
Not (0.4)
World
Bank
110000

3. H2020 with an expected funding of 175000 TND

4. EVPI = (250000*0.7 + 110000*0.3) – 175000 = 33000
5. Given that the best outcome that may result from the expert advice is already dominated (130000)
by the current best solution (175000) the DM will never deviate from choosing H2020 which
means that the EVII=0. Hence, the worth is zero.

1
Question 3
1st expert: P(PS/S) = 0.8; P(PF/S) = 0.2; P(PF/F) = 0.6; P(PS/F)= 0.4

S (0.6) F (0.4) P(PSi) P(./PSj) P(./PF)

Predict Success (PS) 0.8 0.4 0.48 0.16 0.64 3/4 1/4
Predict Failure (PF) 0.2 0.6 0.12 0.24 0.36 1/3 2/3

2nd expert: P(PS/S)= 0,6; P(PF/S)= 0,4; P(PF/F)= 0,7; P(PS/F)= 0,3

S (0.6) F (0.4) P(PSi) P(./PSj) P(./PF)

Predict Success (PS) 0.6 0.3 0.36 0.12 0.48 3/4 1/4
Predict Failure (PF) 0.4 0.7 0.24 0.28 0.52 6/13 7/13

Success (3/4)
150000 250000
Introduce NP
150000 Failure (1/4)
-150000

Do not introduce NB
PS (0,64) -50000

Success (1/3)
250000
-
90000 Introduce NP 16666,6

Failure (2/3)
PF (0,34) - -150000
Consult the 1 st 16666,6
expert Do not introduce NP
(8000) -50000

Success (3/4)
250000
150000
Introduce NP
90000
150000 Failure (1/4)
-150000
nd
Consult the 2
expert
Do not introduce NP
(6000) -50000
PS (0,48)

Success(6/13)
90000 250000
Introduce NP 34615,3
85
34615,3 Failure (7/13)
Do not consult PF (0,52) -150000
85
any expert
Do not introduce NP
-50000
Success (0,6)
250000
90000
Introduce NP
90000
Failure (0,4)
-150000

Do not introduce NP
-50000
The company should not consult any of these two experts and it should introduce the new product in the market.
2
 Question 4

1.
Without disturbance 0
(0.4)
With disturbance
(0.6)

Outsourcing 120,000
2.
Without disturbance 0
84,000
(0.4)
Express 156,000
With disturbance Succeed (0.9)
(0.6) 120,000
140,000 Regular

140,000 Fail (0.1)

320,000
84000
Outsourcing
120,000
Company A should first try to satisfy his customer through regular production and if any
disturbance occurs the Company should continue using regular service.

3. Outsourcing
120,000 120,000
120,000 Without disturbance (1/7) 0
Regular
Production
84,000
Express 156,000
Success (0.9)
120,000
84,000 Regular
140,000 Failure (0.1) 320,000
140,000

Outsourcing 120,000
420000/11

420000/11 Without disturbance (8/11) 0

Express 156,00
With Success (0.9) 0
disturbance 120,000
Regular
(3/11) 140,000
140,000Failure (0.1) 320,000

Without expert
84,000

3
 0.6 0.4
D ND
PD 0.8 0.2 0.48 0.08 P(PD) = 0.56 6/7 1/7
PND 0.2 0.8 0.12 0.32 P(PND)= 0.44 3/11 8/11

The Company A should not solicitate the expert.

4. What is the expected value of perfect information on the ability of the regular outsourcing service
to complete all activities on time when receiving a late request?

Outsourcing 120,000
Without disturbance (0.4) 0
74,160 74,160 Express 156,000
Regular
Production 123,600 120,000 Regular 120000

74,160 Express 156,00

Regular 0
156,000 320,000

Without expert
84,000

EVPI = 9,840
The Company should not pay more than 9,840 TND for this perfect information.