Question: Philip Musa can build either a large electronics section or a small one in his Bathurst drugstore. He can also gather additional information or simply
Philip Musa can build either a large electronics section or a small one in his Bathurst drugstore. He can also gather additional information or simply do nothing. If he gathers additional information, the results could suggest either a favourable or an unfavourable market, but it would cost him
$ comma
to gather the information. Musa believes that there is a chance that the information will be favourable. If the market is favourable, Musa will earn
$ comma
with a large section or
$ comma
with a small one. With an unfavourable electronics market, however, Musa could lose
$ comma
with a large section or
$ comma
with a small section. Without gathering additional information, Musa estimates that the probability of a favourable market is
A favourable report from the study would increase the probability of a favourable market to
Furthermore, an unfavourable report from the additional information would decrease the probability of a favourable market to
Of course, Musa could ignore these numbers and do nothing. What is your advice to Musa?
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