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Exercise 8 Decision Trees exercise, A merchant in MP3 players gets the opportunity to sell 1.000,000 units of a relatively unknown Chinese brand. If the
Exercise 8 Decision Trees exercise, A merchant in MP3 players gets the opportunity to sell 1.000,000 units of a relatively unknown Chinese brand. If the sales goes well, he expects to earn 100,000 euro. If not, he expects to lose 60,000. The merchant has the opportunity to see a number of sample copies and to have them tested in a laboratory. The costs of this investigation amount to 10.000 euro. The result will be a qualification of the MP3 players in one of the following three categories: Excellent, OK, Bad. If the quality is Excellent, then the probability of sales going well is estimated at 0.8. If the quality is OK, then the probability of sales going well is estimated to be 0.4, and if they are bad, this probability is estimated to be 0.2. On first sight, the merchant estimates that the products are excellent with probability 0.3, and OK with probability 0.5. The merchant is allowed to test the MP3 players before making his decision. What should he do? Base your answer on maximizing expected value using a decision tree
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