An optometrist is considering opening a clinic. If the optometrist opens a clinic as the single provider,
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- An optometrist is considering opening a clinic. If the optometrist opens a clinic as the single provider, she could get a profit of $200,000 if the market is favorable, but could lose $150,000 if the market is unfavorable. The optometrist could also for a practice with other doctors and would gain a profit of $120,000 if the market is favorable, but lose only $50,000 if the market is unfavorable. If theoptometrist decides not to open any kind of practice, there is no cost. A market research firm offers to conduct a study at a fee of $25,000. They have used the Bayes’ theorem to make the following statements of probability:
P (favorable market | favorable study) = 0.78
P (favorable market | unfavorable study) = 0.12
P (favorable study) = 0.65
P (favorable market) = 0.5
- Calculate EMVs and draw a decision tree (20 pts)
- Write out the recommended strategy (2 pts)
- Calculate EVSI, how much the optometrist is be willing to pay for the study (3 pts)
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