Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

An Introduction To Business Accounts

Authors: John Harrison, Ron Dawber

1st Edition

9780273019954

More Books

Students also viewed these Accounting questions

Question

What do you know of my (the interviewers) research program?

Answered: 1 week ago

Question

How to find if any no. is divisble by 4 or not ?

Answered: 1 week ago

Question

Explain the Pascals Law ?

Answered: 1 week ago

Question

What are the objectives of performance appraisal ?

Answered: 1 week ago

Question

=+d. Purchaser: buys the item.

Answered: 1 week ago