Question
Please help me with the following question : Dr. Nargis Khan is considering opening a new Dental Clinic in town. She is evaluating three sites:
Please help me with the following question :
Dr. Nargis Khan is considering opening a new Dental Clinic in town. She is evaluating three sites: downtown, the mall, and out at the busy traffic circle. Nargis calculated the value of successful clinics at these locations as follows: downtown, $1,350,000; the mall, $1,400,000; the circle, $1,500,000. Nargis calculated the losses if unsuccessful to be $1,100,000 at either downtown or the mall and $1,300,000 at the circle. Nargis figures her chance of success to be 59% downtown, 64% at the mall, and 71% at the traffic circle.
(a) Draw a decision tree for Dr. Khan and select her best alternative.
(b) Nargis has been approached by a marketing research firm that offers to study the area to determine if another dental clinic is needed. The cost of this study is $ 111,111. Nargis believes there is a 60% chance that the survey results will be positive (show a need for another dental clinic). SRP = survey results positive, SRN = survey results negative, SD = success downtown, SM=success at mall, SC = success at circle, SD' = don't succeed downtown, and so on. For studies of this nature: P (SRP success) = 0.75; P(SRN success) = 0.25; P (SRP not success) = 0.15 and P (SRN not success) = 0.85.
Calculate the revised probabilities for success (and not success) for each location, depending on survey results.
(c) How much is the marketing research worth to Nargis? Calculate the EVSI
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