Oliver has come of age and now has access to a very substantial trust fund. The trust fund allows him to invest part of his money. Oliver is an accomplished chef and has been working as a head chef in one of the trendy restaurants in New York. He is considering opening his own chain of restaurants. He wants to start one in San Francisco where he was born and raised. However, he has some friends who believe that he should also open a "twin" branch in Los Angeles at the same time he's opening the San Francisco location. Oliver is also considering to continue working for his current boss and not open his own restaurantgs. A former classmate, Abigail, helped him prepare a payoff table to help him analyze the situation. States of Nature (payoffs in '000s) Alternatives Very Favorable Favorable Unfavorable Open in San Francisco 380 70 -400 Open in San Francisco and Los Angeles 200 80 -200 Abigail believes that there is a 30 percent chance that the market will be unfavorable, a 30 percent chance that it will be favorable, and 40 percent chance it would be very favorable. Abigail advised Oliver that they should hire a consultant to help them analyze the market situation. The consultant they talked to provides a money back guarantee. What is the most that Oliver should pay the consultant for his services?
Oliver has come of age and now has access to a very substantial trust fund. The trust fund allows him to invest part of his money. Oliver is an accomplished chef and has been working as a head chef in one of the trendy restaurants in New York.
He is considering opening his own chain of restaurants. He wants to start one in San Francisco where he was born and raised. However, he has some friends who believe that he should also open a "twin" branch in Los Angeles at the same time he's opening the San Francisco location. Oliver is also considering to continue working for his current boss and not open his own restaurantgs.
A former classmate, Abigail, helped him prepare a payoff table to help him analyze the situation.
|
States of Nature (payoffs in '000s) |
|||
| Alternatives | Very Favorable | Favorable | Unfavorable |
| Open in San Francisco | 380 | 70 | -400 |
| Open in San Francisco and Los Angeles | 200 | 80 | -200 |
Abigail believes that there is a 30 percent chance that the market will be unfavorable, a 30 percent chance that it will be favorable, and 40 percent chance it would be very favorable. Abigail advised Oliver that they should hire a consultant to help them analyze the market situation. The consultant they talked to provides a money back guarantee.
What is the most that Oliver should pay the consultant for his services?
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