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A beer producer in the western US wants to expand sales to the northeast and must build a new brewery to facilitate the move. The
A beer producer in the western US wants to expand sales to the northeast and must build a new brewery to facilitate the move. The producer may build a small, medium or large brewery. The return on investment in the new brewery will depend on the market share that is obtained after 5 years in operation and on the size of brewery built. The following table describe the possible states of nature and payoffs. What would the recommendation be if the optimistic point of view was taken? What would the recommendation be if the pessimistic point of view was taken? What would the recommendation be if the Equal Likelihood method was used? Assume the following probabilities for the future market share low .20 medium .30 high .50 Calculate the Expected values for the three options and give the recommendation based on EV. Calculate the Expected value with Perfect Information and the Expected value of Perfect Information (assuming probabilities given in part d). Interpret the EV of PI
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