Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Case Study: Module 2- Unit 2- Decision Trees Hale's TV Production is considering producing a pilot for a comedy series in the hope of selling
Case Study: Module 2- Unit 2- Decision Trees Hale's TV Production is considering producing a pilot for a comedy series in the hope of selling it to a major television network. The network my decide to reject the series, but it may also decide to purchase the rights to the series of either one or two years. At this point in time, Hale may either produce the pilot and wait for the network's decision or transfer the rights for the pilot and series to a competitor for $100,000. Hale's decision alternatives and profits (in thousands of dollars) are as follows: States of Nature Decision alternative Reject, s1 1 year, s2 2 years, s3 Produce Pilot, d1 -100 50 150 Sell to competitor, d2 100 100 100 Prior probability 0.20 0.30 0.50 For a consulting fee of $5000, the agency will review the plans for the comedy series and indicate the overall chances of a favorable network reaction to the series. Assume that the agency review will result in favorable (F) or unfavorable (U) review and that the following probabilities are relevant: P(F) = 0.69 P(s1/F) = 0.09 P(s1/U) = 0.45 P(U) = 0.31 P($2/F) = 0.26 P(s2/U) = 0.39 P($3/F) = 0.65 P(s3/U) = 0.16 a. Construct a decision tree for this problem. b. What is the recommended decision if the agency opinion is not used? What is the expected value? c. What is Hale's optimal decision strategy if assuming the agency's information is used? d. Compute the ESI. Is the agency's information worth the $5000 fee
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started