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2. [-/1 Points] DETAILS ASWQUANT13 4.E.016. MY NOTES PRACTICE ANOTHER 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. 1 = a small complex with 30 condominiums do = a medium complex with 60 condominiums Following this, a chance event concerning the demand for the condominiums has two states of nature. 1 = strong demand for the condominiums ", = weak demand for the condominiums The payoff table showing profit is as follows. Decision States of Nature Alternative 1 300 900 1200 600 (a) Show the decision tree. Decision Tree Description $ 1 d2 Market Research d1 d2 5 2 1 No Market Research (b) Use the following probabilities.The payoff table showing profit is as follows. States of Nature Decision Alternative 5 1 1 300 900 d 1200 600 (a) Show the decision tree. Decision Tree Description . A decision tree begins at decision node 1, and an upper and lower branch extend from this node to the right. The upper branch, labeled "Market Research," stops at chance node 2. The lower branch, labeled "No Market Research," stops at decision node 5. From node 2, an upper and lower branch extend to the right. The upper branch, labeled F, stops at chance node 3. The lower branch, labeled U, stops at chance node 4. From node 3, an upper and lower branch extend to the right. The upper branch, labeled d, stops at chance node 6. The lower branch, labeled dy, stops at chance node 7. From node 4, an upper and lower branch extend to the right. The upper branch, labeled d,, stops at chance node 8. The lower branch, labeled d2, stops at chance node 9. From node 5, an upper and lower branch extend to the right. The upper branch, labeled d,, stops at chance node 10. The lower branch, labeled d2, stops at chance node 11. From node 6, an upper and lower branch extend to the right. The upper branch, labeled s,, stops at an answer blank. The lower branch, labeled $2, stops at an answer blank. From node 7, an upper and lower branch extend to the right. The upper branch, labeled s,, stops at an answer blank. The lower branch, labeled $2, stops at an answer blank. From node 8, an upper and lower branch extend to the right. The upper branch, labeled s,, stops at an answer blank. The lower branch, labeled $2, stops at an answer blank. . From node 9, an upper and lower branch extend to the right. The upper branch, labeled s, , stops at an answer blank. The lower branch, labeled s,, stops at an answer blank. From node 10, an upper and lower branch extend to the right. The upper branch, labeled s,, stops at an answer blank. The lower branch, labeled $2, stops at an answer blank. . From node 11, an upper and lower branch extend to the right. The upper branch, labeled s,, stops at an answer blank. The lower branch, labeled $2, stops at an answer blank. (b) Use the following probabilities. P(F) = 0.58 P(U) = 0.42 P(s, IF) = 0.59 P(s, IF) = 0.41 P(s, IV) = 0.16 P(s, IU) = 0.84 P(s, ) = 0.41 P(s2) = 0.59 What is the optimal decision strategy? Conduct the market research. If it is favorable, choose decision d, . If it is unfavorable, choose decision d2- O Conduct the market research. If it is favorable, choose decision d2. If it is unfavorable, choose decision dj- O Don't conduct the market research. Choose decision dj Don't conduct the market research. Choose decision d
