Question: Value of Imperfect Information DataAnalytics charges mRNATech 15K for predicting whether the vaccine will be approved or not. For this fee, it will conduct a

Value of Imperfect Information

DataAnalytics charges mRNATech 15K for predicting whether the vaccine will be approved or not. For this fee, it will conduct a detailed analysis of the vaccine and provide a recommendation to mRNATech, either favourable or unfavourable. The probability that DataAnalytics will make a favourable recommendation is equal to 91.75%.

Unfortunately, DataAnalyticss recommendations can sometimes be wrong. The probability that the vaccine will not be approved given a favourable recommendation by DataAnalytics is 1.63%. On the other hand, the probability that the vaccine will not be approved given an unfavourable recommendation by DataAnalytics is 42.42%.

Given these statistics, mRNATech is wondering whether it would be worthwhile to pay 15K to DataAnalytics to perform this analysis.

a) What is the value of imperfect information that DataAnalytics provides? Should mRNATech hire DataAnalytics? Construct a decision tree to answer this question.

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