Choosing Internships

Part-1: Choosing Internships
(Paste Completed Table Here)

Decision A: I fix it

  1. EV Calculation: I repair the motherboard =
  2. EV Calculation: I damage the motherboard =
  3. EV Calculation: I ruin the motherboard =
    Total cost of Decision A “If I fix it” =

Option B. The computer repair shop fixes it

  1. EV Calculation: Repair the motherboard =
  2. EV Calculation Replace the motherboard =
    Total Cost of Decision B: The computer repair shop fixes it =
    My Decision (assuming I am rational):

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Part-1 Instructions: Complete the Decision Tables below. See the DP-2 sample problems for insight on organizing this problem.

The Internship. It’s approaching the summer before your senior year and need an internship to graduate. You have been offered two different internships opportunities. One is with a company that you’d like to work for after graduation; but there is a possibility it will be unpaid and you aren’t certain you can afford to pay rent out of pocket without taking out a loan. The second internship offer is paid; but it’s not really the type of work that you would enjoy; and you don’t ever see yourself working for this company. You must decide this week. There is only a 40 percent chance the preferred internship will be paid. You would assign 5 quality points to working for your favorite company without pay, and 10 quality points if with pay. You would assign 6 quality points to both outcomes for the other internship. The unknown is you won’t know until just before summer starts whether your preferred internship will be paid; so, you are taking a chance.

  1. Determine two States of Nature, and assign Probabilities
  2. Write the Outcome Narratives & Assign Utility (describe your choice given the state of nature)
  3. Calculate the Expected Utility (show your work).
  4. Choose and bold your Alternative Independent Study States of Nature Alternatives: EU Calculation
    Part-2 Instructions: Complete the Expected Value Problem below. See the Instructor’s sample problems for insight on organizing this problem. No need to build a table, but you may if you feel it will help you structure the problem. Upload to Canvas.
    Computer Repairs: I’m trying to decide whether or not to attempt a repair on my computer’s motherboard or whether to have a computer repair shop fix it. Based on the options below, determine the Probability Reward for each option by doing an expected value calculation. No decision table is needed. Note: that for any given decision, the probabilities of all outcomes must add up to 100%. Calculate the EV for each Decision & Choose
    Option-A: If “I fix it” there are 3 possible states of nature (SoN) & 3 corresponding outcomes as follows:

SoN-1: I succeed in fixing the computer. Outcome: I estimate the cost at $100.

SoN-2: I increase the cost by requiring the mother-board to be repaired. Outcome: I estimate this cost at $425 ($100 for my attempt and an additional + $325, which is the estimated cost to repair the motherboard).

SoN-3: I ruin the motherboard requiring a replacement. Outcome: I estimate the cost at $650 ($100 for my attempt plus $550 for a replacement).

I am fairly confident in my ability so I rate my chances for the above outcomes as: 50% for outcome 1; 30% for outcome 2; and 20% for outcome 3. Do the Probability Reward Calculations for Option-A here:

Option-B: On the other hand, if the computer repair shop fixes it, I’ll be out some amount of money. There are two possible States of Nature (SoN) & two corresponding Outcomes as follows:

SoN-1: The motherboard will need repaired. Outcome: I estimate the cost at $325.
SoN-1: The motherboard will need replaced. Outcome: I estimate the cost at $550.

I rate the chances for the above outcomes as: 60% for Outcome 1; 40% for Outcome 2.

Do the Expected Value Calculations for Option B here:

Plug the values into the report format above.

Sample Solution

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