Consider the data given in problem 11 for Southern Homes. Although Southern management believes that each state of nature is equally likely, it is also considering hiring an economic forecaster to...

Consider the data given in problem 11 for Southern Homes. Although Southern management believes that each state of nature is equally likely, it is also considering hiring an economic forecaster to improve the probability estimates for the states of nature. The forecaster will predict whether there will be an above-average, average, or below-average rise in the GNP for the upcoming year. Based on past experience, the following conditional probabilities are believed to hold for the forecaster’s predictions:

a. How should Southern decorate the homes if the forecaster predicts: (i) an above-average rise in GNP? (ii) an average rise in GNP? (iii) a below-average rise in GNP?

 b. What is the expected value of the forecaster’s information?

 c. What is the efficiency of the forecaster’s information?

d. The data for this problem were constructed to illustrate the concept of the Bayesian decision process. Realistically, do you feel that GNP is a good indicator for housing sales in Atlanta? List some other indicators that might yield a higher efficiency