Ozgun Demirag, the owner of a high-end U.S. apparel store, Feminine Fashions, is planning to open another facility in her hometown of Izmir, Turkey. Demirag can open a large store, a small store, or, to hedge her bets, she could open a medium-sized store. The market for high-end apparel in Izmir could be favorable or unfavorable. If the market is favorable, a large store will earn Ozgun a payoff of $200,000. Nevertheless, if the market is unfavorable, she will suffer a net loss of $180,000. If she opens a medium-sized store and the market is unfavorable, her loss will be $100,000. By contrast, a favorable market for a medium-sized store will generate a payoff of $140,000. A small store with a favorable market will result in a payoff of $ 60,000 but a payoff of –$20,000 if the market is unfavorable. The probability of a favorable market is 0.60 and that of an unfavorable market is 0.4:

1. What should Ozgun decide? Analyze the problem using a decision tree.

2. Perform a sensitivity analysis for the P (Unfavorable Market) to provide a range of probability values where one decision alternative would be preferred over the other two.

3. If Ozgun hires an expert in the apparel industry in Turkey to get information about whether or not the market will be favorable, how much should Ozgun pay for the information?