The Three Dice Problem
Bruce A. Reinig
San Diego State University, USA
Volume 17: 2023, pp. 107-118; ABSTRACT
We describe a five-step problem-solving exercise that is designed to introduce students to the concepts of probability estimates, revising probability estimates to incorporate additional information, and computing the expected value of an information signal in the context of a business problem. We occasionally expand discussion to include prospect theory and enumeration fallacies when time is available. We have used the exercise numerous times with graduate business students enrolled in core operations management, supply chain, and statistics courses. Students typically begin working as individuals and then break into groups as the problems become more complex. The problem never fails to generate excitement in the room and provides an excellent kickoff to an operations management class or degree program.
Keywords: expected value, value of information, model evaluation
.jpg)
