1. Hales TV Productions is considering producing a pilot for a comedy series for a major television network. There is 20% chance that the network may reject the pilot and the series and Hales would loose $100,000, but it may also purchase the program for 1year for $50,000 or 2 years, with 0.5 probability, for $150,000. Hale may also decide to transfer the rights for the series to a competitor for $100,000.

ANSWER THE A AND B:

1. Develop a payoff table (decision table) that will summarize Hales profits (in thousands of dollars), the associated decision alternatives and state of nature.
2. What should the Company do?
3. What is the maximum amount that Hale should be willing to pay for inside information on what the network will do?