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18 16 14 12 10 8 6 4 2 0 -INF - 0 0.5 -
18
16
14
12
10
8
6
4
2
0
-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%
Ques
tion 4
10%
50%
90%
Question 5
10%
50%90%
Question 6
10%
50%
90%
Question 7
10%
50% 90%
Quest
ion 8
10%
50%
90%
Question 9
10%
50%
90%
Question 10
10%
50% 90%
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00

Score on HW Question (./1)

1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

' ( ) ) " $ $ $ " $ * ( $ + ,
' ( ) ) " $ $ $
" $ *
( $ +
, , , ( ( * &
) ( ( * ( $ - (
( ( - * ' , $$ . ) / $ (
) " ( *
" " $
( ) $ , ( ( *
" " $
( ( 0 ( $ $ ( 0
*
" $
* ' $ $ ) " *
" " $
( ) ( " " ) "
, ( *

' 1 , $ ( 2 * *

0.5

Smarty Jones 14 0.3 Bet Smarty Jones Lion Heart 2 -10 0.2 Imperialism -10 0.5
Smarty Jones
14
0.3
Bet Smarty Jones
Lion Heart
2
-10
0.2
Imperialism
-10
0.5
Smarty Jones
-10
0.3
Bet Lion Heart
Lion Heart
1
2
2
30
0.2
Imperialism
-10
0.5
Smarty Jones
-10
0.3
Bet Imperialism
Lion Heart
2
-10
0.2
Imperialism
50

4 ) $ " ) ) $ 5 *

 

Prior

Cond'l Prob Joint Prob

Pre-Posterior

Posterior Joint Prob

Smar

0.5

"Smar"

0.8

0.4

"Smar"

0.45

Smar

0.889

0.4

 

"Lion"

0.1

0.05

Lion

0.067

0.03

"Impe"

0.1

0.05

Impe

0.044

0.02

Lion

0.3

"Smar"

0.1

0.03

"Lion"

0.31

Smar

0.161

0.05

 

"Lion"

0.8

0.24

Lion

0.774

0.24

"Impe"

0.1

0.03

Impe

0.065

0.02

Impe

0.2

"Smar"

0.1

0.02

"Impe"

0.24

Smar

0.208

0.05

 

"Lion"

0.1

0.02

Lion

0.125

0.03

"Impe"

0.8

0.16

Impe

0.667

 

0.16

' 1 , $ ( 2 * *

0.889 Smarty Jones 4 0.067 Bet Smarty Jones Lion Heart 1.333333 -20 0.044 Imperialism -20
0.889
Smarty Jones
4
0.067
Bet Smarty Jones
Lion Heart
1.333333
-20
0.044
Imperialism
-20
0.889
Smarty Jones
-20
0.45
0.067
"Smarty Jones"
Bet Lion Heart
Lion Heart
1
1.333333
-17.3333
20
0.044
Imperialism
-20
0.889
Smarty Jones
-20
0.067
Bet Imperialism
Lion Heart
-17.3333
-20
0.044
Imperialism
40
0.161
Smarty Jones
4
0.774
Bet Smarty Jones
Lion Heart
-16.129
-20
0.065
Imperialism
-20
0.161
Smarty Jones
-20
0.31
0.774
"Lion Heart"
Bet Lion Heart
Lion Heart
2
8.8
10.96774
10.96774
20
0.065
Imperialism
-20
0.161
Smarty Jones
-20
0.774
Bet Imperialism
Lion Heart
-16.129
-20
0.065
Imperialism
40
0.208
Smarty Jones
4
0.125
Bet Smarty Jones
Lion Heart
-15
-20
0.667
Imperialism
-20
0.208
Smarty Jones
-20
0.24
0.125
"Imperialism"
Bet Lion Heart
Lion Heart
3
20
-15
20
0.667
Imperialism
-20
0.208
Smarty Jones
-20
0.125
Bet Imperialism
Lion Heart
20
-20
0.667
Imperialism
40
! " $ %
& %

6 , $ 7 8 9 # :

3 6 ;#

' 1 , $ ( 62 *3 *

0.5

Smarty Jones

0.785202 0.3 Bet Smarty Jones Lion Heart -0.6074 -2 0.2 Imperialism -2 0.5 Smarty Jones
0.785202
0.3
Bet Smarty Jones
Lion Heart
-0.6074
-2
0.2
Imperialism
-2
0.5
Smarty Jones
-2
0.3
Bet Lion Heart
Lion Heart
1
-0.6074 -1.11111 0.962963 -4.32015 0.2 Imperialism -2 0.5 Smarty Jones -2 0.3 Bet Imperialism Lion
-0.6074
-1.11111
0.962963
-4.32015
0.2
Imperialism
-2
0.5
Smarty Jones
-2
0.3
Bet Imperialism
Lion Heart
-1.40082
-2
0.2
Imperialism

0.995885

$

u-Value

 

14

0.785202

-10

-2

-10

-2

-10

-2

30

0.962963

-10

-2

-10

-2

-10

-2

50

0.995885

' 1 , $ ( 62<*<=* ' $ $ ( ) " $ " * ( , > $ ( " , $$ ) " *

0.889 Smarty Jones $ u-Value 0.355606 4 0.355606 0.067 Bet Smarty Jones Lion Heart -0.57279
0.889
Smarty Jones
$
u-Value
0.355606
4
0.355606
0.067
Bet Smarty Jones
Lion Heart
-0.57279
-8
-20
-8
0.044
Imperialism
-8
-20
-8
0.889
Smarty Jones
-8
-20
-8
0.45
0.067
"Smarty Jones"
Bet Lion Heart
Lion Heart
1
-0.57279
-7.40741
0.888889
20
0.888889
0.044
Imperialism
-8
-20
-8
0.889
Smarty Jones
-8
-20
-8
0.067
Bet Imperialism
Lion Heart
-7.60055
-8
-20
-8
0.044
Imperialism
0.987654
40
0.987654
0.161
Smarty Jones
0.355606
4
0.355606
0.774
Bet Smarty Jones
Lion Heart
-6.65232
-8
-20
-8
0.065
Imperialism
-8
-20
-8
0.161
Smarty Jones
-8
-20
-8
0.31
0.774
"Lion Heart"
Bet Lion Heart
Lion Heart
2
-1.0864
-1.11828
-1.11828
0.888889
20
0.888889
-6.69426
0.065
Imperialism
-8
-20
-8
0.161
Smarty Jones
-8
-20
-8
0.774
Bet Imperialism
Lion Heart
-7.42015
-8
-20
-8
0.065
Imperialism
0.987654
40
0.987654
0.208
Smarty Jones
0.355606
4
0.355606
0.125
Bet Smarty Jones
Lion Heart
-6.25925
-8
-20
-8
0.667
Imperialism
-8
-20
-8
0.208
Smarty Jones
-8
-20
-8
0.24
0.125
"Imperialism"
Bet Lion Heart
Lion Heart
3
-2.00823
-6.88889
0.888889
20
0.888889
0.667
Imperialism
-8
-20
-8
0.208
Smarty Jones
-8
-20
-8
0.125
Bet Imperialism
Lion Heart
-2.00823
-8
-20
-8
0.667
Imperialism
0.987654
40
0.987654
! " < $ %
& %

! " ' 1 , , $ " ( ) , $ , " 1 # " ?# $ " * @ .$ )) / ) ( " ( * ' $ ( " 1 , ( " ( ( , , $ +

     

p

CE

   

Sensitivity to p for Risk Neutral Case

0

6.6

 

0.1

6.54

 

6.7

0.1 6.54   6.7

0.2

6.48

6.6

   

6.5

0.3

6.42

 
 

6.4

 
       

0.4

6.36

 

CE

6.3

0.5

6.3

     
     

6.2

0.6

6.24

 
   

6.1

 
   

0.7

6.18

6

 

0.8

6.12

5.9

0.9

6.06

 

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1

6

 
   

p

4 " ) $ " ( 1 , , $ $ $ , $ * ' , A B ( 9*

 

# 6 , $ 7 8 9 # :

3 6 ;#

" ( ) 1 , , $ $ ) " , $ , $ ( 1 " ) $ ?# , " , $ .$ )) / ) " *

p

CE

0

-7.18709

 

0.1 -7.82247

 

0.2 -8.36703

 

0.3 -8.79941

 

0.4 -9.08972

 

0.5 -9.19426

 

0.6 -9.04544

 

0.7 -8.53039

 

0.8 -7.43855

 

0.9 -5.30113

1

-0.64981

CE

0

-2

-4

-6

-8

-10

Sensitivity Analysis to p for Risk Averse Case 0 0.1 0.2 0.3 0.4 0.5 0.6
Sensitivity Analysis to p for Risk Averse Case
0 0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1

p

' 1 , ( " , : $ " $ ( ( * ( ,
' 1 , ( " , : $ " $
( ( * ( ,
( 9# ( 1 , ) ,
( ( 1 , $ 62 *3 )
1 * $ > ( ) , "
, $ 9#* ( , $$ ) " *
$
"
C 5 6, $ , ( ( (
*<3 7 ) " 36% $ 8* ' 6, $ (
$ ( $ " , , $ )
$ $ ( " * 7& ) 6, " $ ) "
36#3 $ *8

 

0.79

S

 
Outdoor 0 $49.80 0.67 0.43 "S" Porch 2 0 $53.70 0 $53.70 0.70 0.70 Indoor
Outdoor
0
$49.80
0.67
0.43
"S"
Porch
2
0
$53.70
0
$53.70
0.70
0.70
Indoor
0
$26.98
0.42
0 -$9.08 -0.18 0.57 "R" Decision 13 3 0 $33.88 0 $9.87 0.50 0.17 Decision
0
-$9.08
-0.18
0.57
"R"
Decision 13
3
0
$33.88
0
$9.87
0.50
0.17
Decision 14
0
$33.88
0.50
 

$85.00

100

$85.00

0.92

0.21

R

 

-$15.00

0

-$15.00

-0.31

0.79

S

 

$75.00

90

0.209302326

R

$75.00

0.86

 

$5.00

S

20

0.79

$5.00

0.09

 

$25.00

40

0.209302326

R

$25.00

0.39

 

$35.00

50

$35.00

 

0.51

$41.74

0.11

0.59

S

 

$85.00

R

100

0.89

$85.00

0.92

 

-$15.00

S

0

0.11

-$15.00

-0.31

 

$75.00

90

0.89

$75.00

0.86

R

 

$5.00

20

$5.00

0.09

0.11

S

 

$25.00

40

$25.00

0.39

0.89

R

 

$35.00

 

50

$35.00

 

0.51

% & ' ($) * $+ +

! "" " , $ ) " ( ) $ 6, $ ) ( $ *

,

*

=

-

 

*<3

>

 

*<<

> *

! - $ ( , )

7 8* D " , $ * ( , $ ) ) " , $ 7( " " " 8* & ) " ( ( $ 1 8 8*

- * $ * > ( - E , F $ " " 2 2# * - , 2 * E 06 6 , $ ( ) ) 7 6 , $ A) $ 8* ( , 1 , $ 2 ( *

72#

* 72# 8?* 72 8 9 7> 8

8
8

2

+ $ ( (

G $ > , H B * ' $ $

( ( ( ) 1 ! -! $

> , 5 , B *
>
, 5 , B *

: ' ( $ I J K 9 *% - , ( " 6, L

: ' 1 " , 6, $ , $ $

I J K + 9 ? % M I J K* ' $ $ I J K 9 ;3 9 ;3 (

6, , * $ , $ I J K N ;3 ( , ) $ , $ I J K O ;3 , - ) $ , L

: ' 6, $ ( $ , $ $ I J K " , + 4> 9 ? M I J K* > 06 , $ , ) ) $$ 6, ( (

$ , ( , +

P , Q * R @> 9 > 9 4> : @> 9 M I J K* ' A $ $ #* ( $ I J K 9 * L

P , Q* ;3R @> 9 9 ? M I J K 4> : @> 9 # ?

I J K* ' A $ $ # ? ;3 ( $

I J K 9 ;3L

P , Q ;3 #R 4> : @> " $ $ I J K*

' $ , $ , A $ I J K 9 ;3*

( "
(
"

: 4 ) 9 * 1 9 *= E 0 5 $ )

$ ( " ) +

 

“i 0

i

0

0.5

0.4

“i 1

0.5

“i 0

i

1

0.1

0.6

“i 1

0.9

i 0

“i 0

0.77

0.26

i 1

0.23

i 0

“i 1

0.27

0.74

i 1

0.73

4 )) " +

0.2

0.2

0.06

0.54

0.2

0.06

0.2

0.54

& ) $ I J K 9 * , *

( , , $ ( " I J . / K 9 *%% I J . # / K 9 * %* ' $ $ , . / , - ( ( , L

$ : 4 ( " ) ) , " " , E 0 5 ) , - $ , . / , $ , . # /L

$ : E 0 5 $ ( ) $ ( "

+

 

“i 0

 

i

0

p

0.4

 

“i 1

 

1-p

 

“i 0

i

1

1-p

0.6

 

“i 1

 

i 0

p

“i 0

 

0.4p / (0.6 - 0.2p)

0.6

- 0.2p

i 1

 

0.6(1-p)/ (0.6 - 0.2p)

i 0

“i 1

 

0.4(1-p) / (0.4 + 0.2p)

0.4

+ 0.2p

i 1

 

0.6p / (0.4 + 0.2p)

0.4p

0.4(1-p)

0.6(1-p)

0.6p

4 )) " +

0.4p

0.6(1-p)

0.4(1-p)

0.6p

& ( $ , $ ) S * " E 0 5 $ ( " $ 0 - > $ * ( ( ( $ , $ ) S * I J . / K S *% I J . # / K T *#*

, " I J

. / K 9

*% + 0.4p / (0.6 - 0.2p) = 0.75 => p 0.82;

, " I J

. # / K 9

*#+ 0.4(1-p) / (0.4 + 0.2p) = 0.1 => p 0.86;

' $ , $ ) S * ( 0 $ E 0 )) A F* , $ , " . / ( 0 , - , , *

( $ ) ( $ - * 4 ( - , " , $ (
( $ ) ( $ -
* 4 ( - , " ,
$ ( ( *
( $
$ ( ( $ > ( $ )
$ 0 ( $ > $ *
( 0 > ( ,
, * $ $$ $ ,
" $ ( 2 *
/
: $ " (
( , * ( (
" *
$ : " , $ *
( 0 ( " $ ( "
*
: $ A ) $ ( " , )
C ) " , $ ,
+ $ ) , ( *
) "
+
High
0.3
-200
Superlight
-65
0.5
-20
**
Medium
-65
0.2
25
Low
-125
Basic

( ) ) " 1 , 1 62< *

"+ Superlights -200 High -125 0.3 ** -125 Basic Superlights ** -20 -42.5 0.5 -20
"+
Superlights
-200
High
-125
0.3
**
-125
Basic
Superlights
**
-20
-42.5
0.5
-20
Medium
-125
Basic
Superlights
**
25
0.2
25
Low
-125
Basic
, ( $ , 1 − 2 * , (
, 1
−2<
,
$ ,
1
7−2 * 8 − 7−2< 8 = 2 * C*
+ , ) $ > $ ( , *
0.0
0
0.2
0.4
0.6
0.8
1
-50.0
) "
-100.0
-
-150.0
-200.0
-250.0

' " ) ) *<#*

+ , ) $ GP>* 50 45 40 35 30 25 20 15 10 5
+ , ) $ GP>*
50
45
40
35
30
25
20
15
10
5
0
0
0.2
0.4
0.6
0.8
1
'
A ≈ *<#* ( )

) , ) U

4 ( 0 ) 0 " , ) ) ) *

+

 

Pass

High

 

0.3

0.3

0.09

0.13

0.09

High

High 0.7 0.21 Pass 0.60 0.4

0.7

0.21

Pass

0.60

0.4

 

No pass

0.67

0.67

Medium

Pass

0.27

0.18

0.5 0.8 0.4 Low

0.5

0.8

0.4

0.5 0.8 0.4 Low

Low

Medium

Medium 0.2 0.1 High

0.2

0.1

High

   

No pass

 

0.64

0.21

Pass

0.33

0.30

0.1

0.2

0.9

0.18

No pass

No pass

Medium

Low

Low 0.1 0.02 0.06 0.02

0.1

0.02

0.06

0.02

 

No pass

Low

' ( ) " ( ) *
'
( ) " ( ) *

High

   

0.13

-200

 

Superlights

-32.09

0.60

-20

**

** Medium

Medium

 

Pass

-32.09

   

0.27

25

 

0.67

Low

-125

-62.75

 

Basic

High

    0.64 -200
   

0.64

-200

 

Superlights

-131.82

0.30

-20

 
  Medium

Medium

 

0.33

-125

   

0.06

25

No pass

 

**

Low

-125

 

Basic

' , ( $ 1 2< *% , ( $ 1 2< GP 1 72< *% 8 72< 8 = 2 * C*

+ " ( ( ( $ ) * ) " - 2 ) " )
+ " ( ( ( $ ) *
) "
-
2
) "
)

) ) ( ( ( $ ( " " *

) " - 2 V )
) "
-
2
V )

( ) ) A ) ) * & 0 ( ) " ( ) " $ , ( *

, $ ( ) L 0 $$ , $ , * & ( *

+

- , U V ) ) " - U 2 ) " )
-
, U
V )
) "
- U
2
) "
)

5 $ " 7$ , 8 ( " $ ( $ , ( ( 0 0 $ ( "*

) " - 2 ) " )
) "
-
2
) "
)

&+ ' " $ ) $ $ 0 0 $ , *

- , U V ) ) " - U 2 ' ) " ) "
-
, U
V )
) "
- U
2
'
) "
)
" 5 $ ( " $ $ ( 0 0 *
) "
- U
2
'
) "
)
- $ $ 7 ,
$ 8* ' " $ $ $ ) ( $ )
*
( ) $ ( " ( ) ) " $
*

 

"Sun"

 

Sun

Sun

p
p

0.4p

"Sun"

0.4p / (0.6 - 0.2p)

0.4p / (0.6 - 0.2p)

0.4p

0.4

1-p

0.4(1-p)

0.6

- 0.2p

0.6(1-p)

"Rain"

 

Rain

"Sun"

Sun

0.6

1-p

1-p p

p

 

0.6(1-p)

0.4

+ 0.2p

0.4(1-p) / (0.4 + 0.2p) 0.4(1-p)

 

Rain

0.6p

"Rain"

"Rain"
 

0.6p

"Rain"

 

Rain

 

Sun

 

Outdoors

0.4p / (0.6 - 0.2p)

0.4p / (0.6 - 0.2p)

100

1.00

0

0.00

Rain

Sun

 

"Sun"

 

Porch

0.4p / (0.6 - 0.2p)

90

0.95

0.6

- 0.2p

 
0.6 - 0.2p   20 0.32

20

0.32

   

Rain

Sun

0.4p / (0.6 - 0.2p)

0.4p / (0.6 - 0.2p)

40

0.57

Indoors

50

0.67

  Rain
 

Rain

 

Sun

 

Outdoors

0.4(1-p) / (0.4 + 0.2p)

0.4(1-p) / (0.4 + 0.2p)

100

1.00

0

0.00

Rain

Sun

0.4

+ 0.2p

0.4(1-p) / (0.4 + 0.2p)

0.4(1-p) / (0.4 + 0.2p)

90

0.95

   

"Rain"

 

Porch

20

0.32

 

Rain

Sun

0.4(1-p) / (0.4 + 0.2p)

0.4(1-p) / (0.4 + 0.2p)

40

0.57

Indoors

50

0.67

 

Rain

W 0 H 0 * ( , ( $$ $ ) $ 0 ( )L $ A ) 5 0 ( ( , ) $ ) *

@ ( ) " $$ , $ ) $ " , $ $ $ " (*

25 20 15 10 5 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
25
20
15
10
5
0
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Accuracy
( $$ " , $ $ 1 2# ( $$
, $ + 3F #%F* @ ( ( " H
, ( " *
!
C
+
' ( ( ) C 7>> && 8 $
, $ $ + , ; - ;
E ) E 4 $ " ( 4 " )
E ) * " 0 0 *
Value of Information

, - E ) E ) >> 2 && E 4 4 ( 4
, -
E )
E )
>>
2
&&
E
4
4 (
4

@ , " " ) $ ) ( 1 " $ " " 0 ) ) *

" ) ) ( ( ( L $ A ) $ E 4 $ " 4* ' " " $ C " ,

 

E

( 5 $ ( 4 *

&

( $ ( $

, L $ A ) .$ ( / ( $ ( * 0 " ( . / L ) $ C " E ) * ' $ ( B $ ( " " $ 1 ) ) *

"+

4 $ C 5 0 * $ ( 6) ) 0 , ( ) ( 6 ,

7

8 =#

− ρ
ρ

( ρ C 5 0 * 4 ( 0 ) * 4 $ ( ρ = 2# *# C $ ( ρ = 2=%* 3 C & ρ = 2# C $ $ ) *

 

Driver

0.1

San Jose

 

$ 25.00

0.22

 

CCI

$

62.03

0.46

62.03 0.46

Bay Area

0.34

0.34
 

0.5

$ 42.00

0.34

**

0.3

   

New Client

0.5

0.33

0.5 0.33

0.4

0.6

$ 53.00

0.41

San Francisco

$ 32.00

0.27

$

62.03

0.462

 

Senior

 

0.6

0.57

0.57

0.85

0.15

$ 95.00

0.61

Japan

$ 35.00

0.30

 

Associate

$ 60.00

0.45

WWS

" ( $$ $ >> *

+ 4 , ( && ( , $$ 2< * 3C $ C ( " *

+ , $ > 0 $ ( , *

Certain Equivalent

$70

$60

$50

$40

$30

$20

$10

$-

>> && 0 200 400 600 800 1000 1200
>>
&&
0
200
400
600
800
1000
1200

Risk Tolerance

' , 7 ( 8 )) ( ρ 2< C*

+ @ ( C 0 ( ) $ , $ * " " ( " $ ( "*

, - E ) E ) & $ U >> V ) 2 && E
, -
E )
E )
& $
U
>>
V )
2
&&
E
4
4 (
4

' , ) ( , $ , *

 

Driver

1

San Jose

$

25.00

0.22

 

CCI

$ 25.00

0.22

$ 25.00 0.22

Bay Area

0.34

Bay Area 0.34

0.5

$

42.00

0.34

 

0

 

New Client

0.5

0.33