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. Joyce estimates there is a 62% chance that the survey will predict a strong demand and a 38%

chance that the survey will predict a weak demand. If the results of the survey predict a strong demand, the probability of strong demand is 77%. If the results of the survey predict a weak demand, the probability of strong demand is 32%.

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

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

Note: Problem AppendixLO1 17.42 requires you to calculate the posterior probabilities. The problem is an alternative version of Problem 17.41, in which the posterior probabilities were given.

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.