A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condominium. After deciding whether to conduct the market research study, they have the following two decision alternatives. 0,- a small complex with 30 condominiums dy - a medium complex with 60 condominiums Following this, a chance event concerning the demand for the condominiums has two states of nature. $, - strong demand for the condominiums $ - weak demand for the condominiums The payoff table showing profit is as follows. States of Nature Decision Alternative 31 32 d. 400 1200 d2 1600 800 (a) Show the decision tree Dedsion Tree Description 13 Market Research 10 Na Market Research 3 (b) Use the following probabilities. PF) - 0.57 PU) - 0.43 PS. IF) = 0.59 Pls1 -0.41 PIS, IU) = 0.16 PSIU) - 0.84 Prs) - 0.41 Psy) = 0.59 What is the optimal decision strategy? Conduct the market research. If it is favorable, choose decision d1. If it is unfavorable, choose decision de Conduct the market research. If it is favorable, choose decision d2. If it is unfavorable, choose decision d. Don't conduct the market research. Choose decision d. Don't conduct the market research. Choose decision de A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condominium. After deciding whether to conduct the market research study, they have the following two decision alternatives. 0,- a small complex with 30 condominiums dy - a medium complex with 60 condominiums Following this, a chance event concerning the demand for the condominiums has two states of nature. $, - strong demand for the condominiums $ - weak demand for the condominiums The payoff table showing profit is as follows. States of Nature Decision Alternative 31 32 d. 400 1200 d2 1600 800 (a) Show the decision tree Dedsion Tree Description 13 Market Research 10 Na Market Research 3 (b) Use the following probabilities. PF) - 0.57 PU) - 0.43 PS. IF) = 0.59 Pls1 -0.41 PIS, IU) = 0.16 PSIU) - 0.84 Prs) - 0.41 Psy) = 0.59 What is the optimal decision strategy? Conduct the market research. If it is favorable, choose decision d1. If it is unfavorable, choose decision de Conduct the market research. If it is favorable, choose decision d2. If it is unfavorable, choose decision d. Don't conduct the market research. Choose decision d. Don't conduct the market research. Choose decision de
