Segments and surveys. Aaron’sAir (see Exercises 32, 34, and 36), could purchase a market survey from a firm that has advised the island tourist and conference bureau.

He thinks their projections would help him determine whether the probability of high demand might be as high as .5 or as low as .2, with the corresponding probabilities for medium demand being .3 and .4. If he doesn’t purchase the market survey, he’ll make a decision based on his previous best estimates (see Exercise 36).

a) Draw the decision tree.

b) Aaron thinks the market survey is likely to be optimistic.

He’d estimate a 65% probability that it would predict the higher (.5) probability of high demand. What would be the EVwSI?

c) If the consultant’s report costs $2,000, should Aaron pay for it?