Topic: Decision Analysis Question 2: (15 marks) Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profits (in $1000s) that would be realized during the next year for each of three investment alternatives: State of nature Good Economy Poor Economy Investment A 250 50 Investment B 365 105 Investment C 800 -200 Without any information, Mickey estimates that the probability of Good Economy will be 0.6. a) Draw a simple decision tree for this problem. What is the best alternative based on maximum Expected Monetary Value (EMV) criterion? [3] b) Mickey is also considering hiring a market consultant at a cost of $40,000 to get additional information on the future economy. In the past, if the economy was good, the consultant predicted positive information 85% of the times. If the economy was poor, the consultant predicted negative information 80% of the times. Calculate the following posterior probabilities: [3] P(Good Economy /Positive Information) P(Poor Economy/Negative Information) c) Draw a complex decision tree and answer the following questions: [5] Should Mickey hire the market consultant? Why? . If the answer is Yes and the consultant gives positive information, then which investment alternative should Mickey invest? Why? . If the answer is Yes and the consultant gives negative information, then which investment alternative should Mickey invest? Why?. If the answer is No, then which investment alternative should Mickey invest? d) Based on the Expected Value of Sample Information, how much might Mickey be willing to pay for the additional information? Why? [2] e) Calculate the efficiency of this sample information and interpret its meaning. [2]