Cost - Washington State University
The expected payoff, or average payoff, is. EP(expand) = q100 + (1 - q)(-10). The probability of demand being high is q and the payoff when demand is high is 100. So on average the firm gets q100 in the state where price is high. And, the probability of demand being low is 1-q and the payoff is - 10 in that state. ................
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