In: Statistics and Probability
A management company must first decide whether to undertake a
market research survey. If the market...
- A management company must first decide whether to undertake a
market research survey. If the market research study is conducted,
the outcome will either be favorable (F) or unfavorable (U). Assume
there are only two decision alternatives, D1 and D2, and two states
of nature, S1 and S2. The payoff table showing profit is as
follows:
State of Nature
|
Decision Alternative
|
S1
|
S2
|
D1
|
100
|
300
|
D2
|
400
|
200
|
- Using the following probabilities, what is the optimal decision
strategy?
P(F) = 0.56 P(S1/F) =
0.57
P(S1/U) =
0.18
P(S1) = 0.40
P(U) = 0.44 P(S2/F) =
0.43
P(S2/U) = 0.82
P(S2) = 0.60
- Find the Efficiency of this market research. What would be your
recommendation?
- How much will this company be willing to pay for this market
research?