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! 35 1.00 0.90 30 0.80 25 0.70 0.60 20 0.50 15 0.40 0.30 10
!
35
1.00
0.90
30
0.80
25
0.70
0.60
20
0.50
15
0.40
0.30
10
0.20
5
0.10
0
0.00
-INF - 0
0.5 - 1
1.5 - 2
2.5 - 3
3.5 - 4
4.5 - 5
5.5 - 6
6.5 - 7
7.5 - 8
8.5 - 9
9.5 - 10
Number of Grades within Range
Cumulative
Question 1
10%
50% 90%
Question 2
10%
50%
90%
Question 3
10%
50% 90%
Question 4
10%
50% 90%
Question 5
10%
50%
90%
Question 6
10%
50% 90%
Question 7
10%
50%
90%
Question 8
10%
50%
90%
Question 9
10%
50%
90%
Question 10
10%
50%
90%
-1.50
-1.00
-0.50
0.00
0.50
1.00
Score on HW Question (./1)
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! Value of Clairvoyance Sensitivity to p for Kim and Mary 25 (0.47, 24.4) (0.47,
!
Value of Clairvoyance Sensitivity to p for Kim and Mary
25
(0.47, 24.4)
(0.47, 20.9)
20
Kim
Mary
(0.87, 15.2)
15
1
10
(0.87, 8.9)
5
0
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
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Mr.Driller's decision-- all figures are in $ million

$6.425

DrillingDecision Presence of Dome DrillingResults Large 0.2 Dome 0.3 Small $19.50 0.7 0.5 DryHole Drill
DrillingDecision
Presence of Dome
DrillingResults
Large
0.2
Dome
0.3 Small
$19.50
0.7
0.5
DryHole
Drill (DrillingCost: $10)
$16.425-$10=$6.425
Large
0.3
0.05
No Dome
0.25 Small
$9.25
0.7
DryHole
DoNot Drill
$0

$60

$25

$0

$60

$25

$0

$0

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Calculating the value of perfect information on the dome uncertainty (all figures are in $
Calculating the value of perfect information
on the dome uncertainty
(all figures are in $ million)
Drilling Decision
Presence of Dome
Drilling Results
Large
$60
0.2
Dome
0.3 Small
$25
$19.50
0.7
0.5
Dry Hole
$0
Drill (Drilling Cost: $10)
$16.425-$10=$6.425
Large
$60
0.3
0.05
No Dome
0.25 Small
$25
$6.425
$9.25
w/o Perfect Info on Dome
0.7
Dry Hole
$0
Do Not Drill
$0
$0
Large
$60
0.2
Drill (Cost: $10)
Dome
0.3 Small
$25
$19.5-$10=$9.5
$19.50
Dome
0.5
Dry Hole
$0
$9.50
Do Not Drill
$0
0.7
$0
$6.650
w/Perfect Information
Large
$60
0.05
0.3
Drill (Cost: $10)
No Dome
0.25 Small
$25
$9.25-$10=-$0.75
$9.25
No Dome
0.7
Dry Hole
$0
$0
Do Not Drill
$0
$0
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! 1// 9-. ! ! Prospect u_value Hit $1,200,000 15.00 Invest 0.4 14.4725509 Flop $500,000
!
1// 9-. ! !
Prospect
u_value
Hit
$1,200,000
15.00
Invest
0.4
14.4725509
Flop
$500,000
14.12
1
0.6
14.47
$709,667
Don't Invest
$600,000
14.30
14.30
1// 9-.
Prospect
u_value
Invest
$1,122,696
14.93
"Hit"
1
0.4
14.93
Don't Invest
$522,696
14.17
14.47
$709,667
Invest
$422,696
13.95
"Flop"
2
0.6
14.17
Don't Invest
$522,696
14.17
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Exercise option 0.763 $40.00 Price goes up 50 40 2 0.56 90 0.84 Do not
Exercise option
0.763
$40.00
Price goes up
50
40
2
0.56
90
0.84
Do not exercise option
$90.00
Buy option
100
90
0.84
-10
72.82168
0.77
Exercise option
0.237
$40.00
Price goes down
50
40
0.590
1
0.56
Eric says "UP"
40
1
0.56
Do not exercise option
72.82168
$20.00
0.77
30
20
0.33
0.763
Price goes up
$100.00
Do Not buy option
100
100
0.87
0
72.57861
0.237
0.77
Price goes down
$30.00
30
30
0.46
Exercise option
$63.76
0.366
$40.00
0.73
Price goes up
50
40
2
0.56
90
0.84
Do not exercise option
$90.00
Buy option
100
90
0.84
-10
53.09044
0.66
Exercise option
0.634
$40.00
Price goes down
50
40
0.410
1
0.56
Eric says "Down"
40
1
0.56
Do not exercise option
53.09044
$20.00
0.66
30
20
0.33
0.366
Price goes up
$100.00
Do Not buy option
100
100
0.87
0
46.02223
0.634
0.61
Price goes down
$30.00
30
30
0.46

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Exercise option 0.319 $40.00 Price goes up 50 40 2 0.56 90 0.84 Do not
Exercise option
0.319
$40.00
Price goes up
50
40
2
0.56
90
0.84
Do not exercise option
$90.00
Buy option
100
90
0.84
-10
51.21278
0.65
Exercise option
0.681
$40.00
Price goes down
50
40
0.470
1
0.56
Josh says "UP"
40
1
0.56
Do not exercise option
51.21278
$20.00
0.65
30
20
0.33
0.319
Price goes up
$100.00
Do Not buy option
100
100
0.87
0
43.66289
0.681
0.59
Price goes down
$30.00
30
30
0.46
Exercise option
$64.73
0.849
$40.00
0.73
Price goes up
50
40
2
0.56
90
0.84
Do not exercise option
$90.00
Buy option
100
90
0.84
-10
78.40452
0.80
Exercise option
0.151
$40.00
Price goes down
50
40
0.530
1
0.56
Josh says "Down"
40
2
0.56
Do not exercise option
80.89652
$20.00
0.81
30
20
0.33
0.849
Price goes up
$100.00
Do Not buy option
100
100
0.87
0
80.89652
0.151
0.81
Price goes down
$30.00
30
30
0.46

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