Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

Step: 3

blur-text-image

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

Non-Cooperative Game Theory

Authors: Takako Fujiwara Greve

1st Edition

4431556451, 9784431556459

More Books

Students also viewed these Mathematics questions