For Kim’s friend, Mary, whom we introduced in the party problem and has preference probabilities and

For Kim’s friend, Mary, whom we introduced in the party
problem and has preference probabilities and dollar values presented in Figure
10.18, plot the sensitivity of the value of clairvoyance (VOC) to the
probability p of Sunshine. How many of the following statements are true?

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I. For any value of/?, Mary should be willing to pay at
least as much as Kim for clairvoyance.

II. The difference between the value of the deal with free
clairvoyance and the value of the deal with no clairvoyance is greatest when p
is approximately 0.87.

III. Mary’s VOC sensitivity curve has the same switch points
as Jane’s. (By “switch points,” we mean the values of p at which the
decision changes).

a. 0 c. 2

b. 1 d. 3