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12.28 Jay Olsen, a writer of novels, just has com- pleted a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title. If he signs with the network, he will receive a single lump sum of $900, but if he signs with the movie company, the amount he will receive depends on how successful the movie is at the box office. (ALL $ units are in thousands.) + TV Network: $900 • Movie Probabilities Event Small box Medium box office (S) office (M) $250 $1,000 Large box office (L) 10.1 (a) Which option would you recommend based on the expected monetary value (EMV) crite- rion? (Assume that he is a risk-neutral person interested in maximizing the expected monetary value.) (b) How much would he be willing to pay to know the true state of nature? (c) Jay can send his novel to a prominent movie critic to assess the potential box office success. From his past experience, the movie critic's reli- ability of predicting the box office success is as follows. Favorable prediction means that it is highly likely the movie would be a box office success. It will cost $20 to get his novel evalu- ated by the movie critic.

12.28 Jay Olsen, a writer of novels, just has com- pleted a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title. If he signs with the network, he will receive a single lump sum of $900, but if he signs with the movie company, the amount he will receive depends on how successful the movie is at the box office. (ALL $ units are in thousands.) + TV Network: $900 • Movie Probabilities Event Small box Medium box office (S) office (M) $250 $1,000 Large box office (L) 10.1 (a) Which option would you recommend based on the expected monetary value (EMV) crite- rion? (Assume that he is a risk-neutral person interested in maximizing the expected monetary value.) (b) How much would he be willing to pay to know the true state of nature? (c) Jay can send his novel to a prominent movie critic to assess the potential box office success. From his past experience, the movie critic's reli- ability of predicting the box office success is as follows. Favorable prediction means that it is highly likely the movie would be a box office success. It will cost $20 to get his novel evalu- ated by the movie critic.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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  • DECISION TREE ANALYSIS... YOU CAN USE A PEN AND PAPER, AND UPLOAD YOUR ANSWER. ALSO DRAW THE DECISION TREE
12.28 Jay Olsen, a writer of novels, just has com- pleted a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title. If he signs with the network, he will receive a single lump sum of $900, but if he signs with the movie company, the amount he will receive depends on how successful the movie is at the box office. (AIL S units are in thousands.) • TV Network: $900 Movie Event Small box Medium box office (S) office (M) $1,000 Large box office (L) $3,200 (a) Which option would you recommend based on the expected monetary value (EMV) crite- rion? (Assume that he is a risk-neutral person interested in maximizing the expected monetary value.) (b) How much would he be willing to pay to know the true state of nature? (c) Jay can send his novel to a prominent movie critic to assess the potential box office success. From his past experience, the movie critic's reli- ability of predicting the box office success is as follows. Favorable prediction means that it is highly likely the movie would be a box office success. It will cost $20 to get his novel evalu- ated by the movie critic. PLEASE, ALSO DRAW A DECISION TREE, YOU CAN USE A PAPER AND PEN TO WRITE/DRAW, AND UPLOAD YOUR ANSWER
Transcribed Image Text:12.28 Jay Olsen, a writer of novels, just has com- pleted a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title. If he signs with the network, he will receive a single lump sum of $900, but if he signs with the movie company, the amount he will receive depends on how successful the movie is at the box office. (AIL S units are in thousands.) • TV Network: $900 Movie Event Small box Medium box office (S) office (M) $1,000 Large box office (L) $3,200 (a) Which option would you recommend based on the expected monetary value (EMV) crite- rion? (Assume that he is a risk-neutral person interested in maximizing the expected monetary value.) (b) How much would he be willing to pay to know the true state of nature? (c) Jay can send his novel to a prominent movie critic to assess the potential box office success. From his past experience, the movie critic's reli- ability of predicting the box office success is as follows. Favorable prediction means that it is highly likely the movie would be a box office success. It will cost $20 to get his novel evalu- ated by the movie critic. PLEASE, ALSO DRAW A DECISION TREE, YOU CAN USE A PAPER AND PEN TO WRITE/DRAW, AND UPLOAD YOUR ANSWER
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