Car Repairs: I\'m trying to decide whether or not to attempt a repair on my old

Question

Car Repairs: I'm trying to decide whether or not to attempt a repair on my old car or whether to have a dealer 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. Calculate the EV for each Decision & Choose Decision "A" If "I fix it" there are three possible outcomes 1. I succeed in fixing the carburetor. I estimate the cost at $150. 2. I increase the cost by requiring the carburetor to be rebuilt. I estimate this cost at $400 ($150 for my attempt and an additional + $250, which is the dealer cost to rebuild). 3. I ruin the carburetor requiring a replacement. I estimate the cost at $600 ($150 for my attempt plus $450 for 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: 1. Fix carburetor = 2. Damage carburetor = 3. Ruin carburetor = Total cost of Decision A "If I fix it" = Decision "B" On the other hand, if the "dealer fixes it," I'll be out some amount of money and will have to tow the car into the shop. There are two possible outcomes: 1. The carburetor will need rebuilt. I estimate the cost at $250. 2. The carburetor will need replaced. I estimate the cost at $450.

Explanation / Answer

Decision A.

Probability reward Calculations

1. Fix carburetor :- $150*0.50 = $75

2. Damage Carburetor :- $400*0.30 = $120

3. Ruin Carburetor :- $600*0.20 = $120

Total cost of decision A "if I fix it" = $75+$120+$120 = $315

Decision B

If the dealar fixes it the cost would be $450.

Since the expected value for decision A is less we will choose Decision A

There are two possible outcomes

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