Consider again the landowners decision problem described in Problem 39. Suppose now that, at a cost of
Question:
a. Given that the landowner pays for the soundings test and the test indicates that gas is present, what is the landowner’s revised estimate of the probability of finding gas on this site?
b. Given that the landowner pays for the soundings test and the test indicates that gas is not present, what is the landowner’s revised estimate of the probability of not finding gas on this site?
c. Should the landowner request the given soundings test at a cost of $90,000? Explain why or why not. If not, at what price (if any) would the landowner choose to obtain the soundings test?
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Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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