3. Suppose now that the market research study has a cost. What would be the maximum amount that you would be willing to pay for market research? (a) (b) $19,000 $147,000 (c) $0 (d) $1,000 (e) $60,000
A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month
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 condo- minium.
After deciding whether to conduct the market research study, they have the following two decision alternatives.
d1 = a small complex with 30 condominiums
d2 = a medium complex with 60 condominiums
Following this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiums
s2 = weak demand for the condominiums
The payoffs, probabilities, and decision tree associated with this problem are given on the next page.
Note that payoffs are given in thousands of dollars.
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