Joyce can hire a market research firm to conduct a survey to better ascertain the demand for this product. The cost of the survey is $20,000. If the market has strong demand for the product, the probability that the survey will predict a strong demand is 80%. If the market has a weak demand for the product, the probability that the survey will predict a strong demand is 35%.

a. Choose the best course of action for Joyce under these conditions.

b. What is the most that Joyce should pay for the survey?

Joyce is the director of manufacturing for Titan Industries, which is considering building a new facility in the Midwest. The demand for the product manufactured in the facility will be either strong or weak. The following decision table summarizes Joyce’s options and the associated payoffs in millions of dollars.
Demand Option Strong Weak Build large facility $1.3 -$1.7 Build small facility $0.8 -$0.2 Don’t build facility $0 $0.AppendixLO1