A publishing company is trying to decide whether to publish a new business law textbook. Based on a careful reading of the latest draft of the manuscript, the publisher’s senior editor in the business textbook division assesses the distribution of possible payoffs earned by publishing this new book. The file P06_75.xlsx contains this probability distribution.
Before making a final decision regarding the publication of the book, the editor can learn more about the text’s potential for success by thoroughly surveying business law instructors teaching at universities across the country. Historical frequencies based on similar surveys administered in the past are also provided in this file.
a. Find the strategy that maximizes the publisher’s expected payoff if the survey cost is $10,000.
b. What is the most that the publisher would be willing to pay to conduct a new survey of business law instructors?
c. Assuming that a survey could be constructed that provides perfect information to the publisher, how much would the company be willing to pay to acquire and implement such a survey?

  • CreatedApril 01, 2015
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