Hales TV Productions is considering producing a pilot for a comedy series in the hope of selling
Question:
The probabilities for the states of nature are P(s1) = 0.20, P(s2) = 0.30, and P(s3) = 0.50. For a consulting fee of $5000, an agency will review the plans for the comedy series and indicate the overall chances of a favorable network reaction to the series. Assume that the agency review will result in a favorable (F) or an unfavorable (U) review and that the following probabilities are relevant:
a. Construct a decision tree for this problem.
b. What is the recommended decision if the agency opinion is not used? What is the expected value?
c. What is the expected value of perfect information?
d. What is Hale€™s optimal decision strategy assuming the agency€™s information is used?
e. What is the expected value of the agency€™s information?
f. Is the agency€™s information worth the $5000 fee? What is the maximum that Hale should be willing to pay for the information?
g. What is the recommendeddecision?
Introduction to Probability and Statistics
ISBN: 978-1133103752
14th edition
Authors: William Mendenhall, Robert Beaver, Barbara Beaver