1. A cereal company is considering launching a new product, Chocohealth Bombs, either with or without an aggressive advertisement campaign. The success of the product depends upon market response, which could be good, fair, or poor. The profit for each option as a function of market condition is shown in the table below. It is believed that there is a 30% chance of good reaction, a 60% chance of a fair reaction, and a 10% chance of a poor reaction. Decision Reaction good fair poor Produce product without $800,000 $200,000 -$1,000,000 advertisement campaign Produce product with $500,000 $500,000 -$1,200,000 advertisement campaign Don't produce product $0 $0 $0 Which option should the company take to maximize expected profit? b. What is the value of perfect information? C. Suppose, for $100,000, a market survey could be conducted. Based upon experience, the company knows probability of a prediction (positive, neutral, negative) given the actual market condition is as shown in the table below. Market Prediction positive neutral negative good .8 .2 fair .5 .4 1 poor 1 .4 .5 What decision should be made based upon each possible outcome of the survey? Is the survey worth conducting? a. 0 1. A cereal company is considering launching a new product, Chocohealth Bombs, either with or without an aggressive advertisement campaign. The success of the product depends upon market response, which could be good, fair, or poor. The profit for each option as a function of market condition is shown in the table below. It is believed that there is a 30% chance of good reaction, a 60% chance of a fair reaction, and a 10% chance of a poor reaction. Decision Reaction good fair poor Produce product without $800,000 $200,000 -$1,000,000 advertisement campaign Produce product with $500,000 $500,000 -$1,200,000 advertisement campaign Don't produce product $0 $0 $0 Which option should the company take to maximize expected profit? b. What is the value of perfect information? C. Suppose, for $100,000, a market survey could be conducted. Based upon experience, the company knows probability of a prediction (positive, neutral, negative) given the actual market condition is as shown in the table below. Market Prediction positive neutral negative good .8 .2 fair .5 .4 1 poor 1 .4 .5 What decision should be made based upon each possible outcome of the survey? Is the survey worth conducting? a. 0