Hello, there two problems I need help on. the reson there are two rpoblems is b/c the 2nd problem is based on the 1st one. Well here it goes:
Problem 18:
The Miramar Company is going to introduce one of three new products: a widgetm a hummer, or a nimnot. The market conditions (favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table.
Market Conditions
Favorable (.2) Stable (.7) Unfavorable (.1)
Product
Widget $120,000; $70,000; $-30,000
Hummer $60,000; 40,000; 20,000
Nimnot $35,000; 30,000; 30,000
a. Compue the expected value for each decision and select the best one.
b. Develop the opportunity loss table and compute the expected opportunity loss for each product.
c. Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.
Problem 37 based on Prob. 18
The Miramar company in problem 18 is considering contracting with a market research firm to do a survey to determine future market conditions. There is a .60 probability of a positive report given favorable conditions, a .30 probability of a positive report given stable conditions, and a .10 probability of a positive report given unfavorable conditions. There is a .90 probability of a negative report given unfavorable conditions, a .70 probability given stable conditions, and a .40 probability given favorable conditions. Using decision tree analysis and posterior probability tables, determine the decision strategy the company should follow, the expected value of the strategy, and the maximum amount the company should pay the market research firm for the survey results.
Thank you for your time.
Problem 18:
The Miramar Company is going to introduce one of three new products: a widgetm a hummer, or a nimnot. The market conditions (favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table.
Market Conditions
Favorable (.2) Stable (.7) Unfavorable (.1)
Product
Widget $120,000; $70,000; $-30,000
Hummer $60,000; 40,000; 20,000
Nimnot $35,000; 30,000; 30,000
a. Compue the expected value for each decision and select the best one.
b. Develop the opportunity loss table and compute the expected opportunity loss for each product.
c. Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.
Problem 37 based on Prob. 18
The Miramar company in problem 18 is considering contracting with a market research firm to do a survey to determine future market conditions. There is a .60 probability of a positive report given favorable conditions, a .30 probability of a positive report given stable conditions, and a .10 probability of a positive report given unfavorable conditions. There is a .90 probability of a negative report given unfavorable conditions, a .70 probability given stable conditions, and a .40 probability given favorable conditions. Using decision tree analysis and posterior probability tables, determine the decision strategy the company should follow, the expected value of the strategy, and the maximum amount the company should pay the market research firm for the survey results.
Thank you for your time.