Question: You are about to begin a new marketing campaign that

You are about to begin a new marketing campaign that you hope will turn out to be a huge success, although there’s a chance that it may only be a modest success, or even a complete bust. You have just submitted a budget request to pay for the campaign. In your estimation, it’s 25% likely that you’ll be given a large budget—at least $2 million. It’s more likely (65%) that you will be given a mid-level budget of around $1.5 million. There’s a small probability (10%) that you will be given a minimal budget of less than $1 million.
You estimate that with a minimal budget, the chance of the campaign being a huge success is only about 5%. It’s much more likely that the campaign will be a bust—75%—or only a modest success (20%). If you’re given a mid-level budget, the chance of a bust drops to 50-50, the chance of a huge success increases to 15% and the chance of modest success rises to 35%. If you’re given a large budget, you believe a huge success is 70% likely, with the chance for a bust dropping to only 10%. The chance for modest success, in this case, would be 20%. Draw a probability tree and use it to determine the probability that the campaign will be
a. A huge success.
b. At least a modest success.
c. A bust.

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  • CreatedJuly 16, 2015
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