Hank is considering placing a bet on the upcoming showdown between the Penn State and Michigan football teams in State College. The winner of this contest will represent the Big Ten Conference in the...

Hank is considering placing a bet on the upcoming showdown between the Penn State and Michigan football teams in State College. The winner of this contest will represent the Big Ten Conference in the Rose Bowl on New Year’s Day. Without any additional information, Hank believes that Penn State has a 0.475 chance of winning this big game. If he wins the bet, he will win $500; if he loses the bet, he will lose $550. Before placing his bet, he may decide to pay his friend Al, who happens to be a football sportswriter for the Philadelphia Enquirer, $50 for Al’s expert prediction on the game. Assume that Al predicts that Penn State will win similar games 55% of the time and that Michigan will win similar games 45% of the time. Furthermore, Hank believes that when Al predicts that Penn State will win, there is a 70% chance that Penn State will indeed win the football game. Finally, when Al predicts that Michigan will win, Hank believes there is a 20% chance that Penn State will proceed to win the upcoming game.


a.   To maximize his expected profit from this betting opportunity, how should Hank proceed? (You can assume that Hank has three options: to bet on Penn State, to bet on Michigan, or not to bet at all.)


b.   Compute and interpret EVSI for this decision problem.


c.   Compute and interpret EVPI for this decision problem.