1. Upjohn is developing a new product to promote hair growth in cases of male pattern baldness. If Upjohn markets the new product and it is successful, the company will earn $500,000 in additional profit. If the marketing of this new product proves to be unsuccessful, the company will lose $350,000 in development and marketing cost. In the past, similar products have been successful 60% of the time. At a cost of $50,000, the effectiveness of the new hair restoration product can be thoroughly tested. If the results of such testing are favourable, there is an 80% chance that the marketing efforts surrounding this new product will be successful. If the results of such testing are not favourable, there is a mere 30% chance that the marketing efforts will be successful. Upjohn currently believes that the probability of receiving favourable test results is 0.60.

a.) Identify the strategy that maximizes Upjohn's expected net earnings in this situation.

b.) Calculate and interpret the expected value of survey (or sample) information (EVSI) in this decision problem.