Hale's Productions is considering producing a pilot for a comedy series in the hope of selling it to a major streaming service. Thestreaming service may decide to reject the series, but it may also decide to purchase the rights to the series for either one or twoyears. At this point in time, Hale may either produce the pilot and wait for the streaming service's decision or transfer the rightsfor the pilot and series to a competitor for $100,000. Hale's decision alternatives and profits (in thousands of dollars) are asfollows:Decision AlternativeProduce pilot, d₁Sell to competitor, d₂ 100P(F) = 0.69P(U)= 0.31P(S₁IF) = 0.08P(S₂IF) = 0.28P(S3|F) = 0.64iDecision TreeAgency1Reject, S₁The probabilities for the states of nature are P(S₁) = 0.1947, P(S₂) = 0.3141, and P(S3) = 0.4912. For a consulting fee of $5,000,an agency will review the plans for the comedy series and indicate the overall chances of a favorable streaming service reaction tothe series. Assume that the agency review will result in a favorable (F) or an unfavorable (U) review and that the followingprobabilities are relevant.No Agencysell to competitor, d,P(S₁ IU) = 0.45P(S₂|U) = 0.39P(S3|U) = 0.16(a) Construct a decision tree for this problem. (Enter your answers in thousands of dollars.)DescriptionF-100UX thousand dollars34State of Nature51 Year, S₂ 2 Years, S350(g) What is the recommended decision?100What is the expected value (in thousands of dollars)?100thousand dollars(f) Is the agency's information worth the $5,000 fee?YesNo6Agency; if unfavorable, sell to competitorAgency; if favorable, produce the pilotNo agency; produce the pilotNo agency; sell to competitor891011SS₂S1$2$3(b) What is the recommended decision if the agency opinion is not used?O produce pilot, d₁$2$3150S100S3(c) What is the expected value of perfect information (in thousands of dollars)?-5X thousand dollars(d) What is Hale's optimal decision strategy assuming the agency's information is used?If favorable, produceIf unfavorable, sell(e) What is the expected value (in thousands of dollars) of the agency's information? (Round your answer to two decimalplaces.)96.3812.666.24xxWhat is the maximum that Hale should be willing to pay (in thousands of dollars) for the information? (Round your answerto two decimal places.)3.62X thousand dollars

Amount received from selling to competitor = $100,000Probabilities of states of…

Answered: Hale's Productions is considering…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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