The NBS television network earns an average of$400,000 from a hit show and loses an average of $100,000on a flop. Of all shows reviewed by the network, 25% turnout to be hits and 75% turn out to be flops. For $40,000, amarket research firm will have an audience view a pilot ofa prospective show and give its view about whether theshow will be a hit or a flop. If a show is actually going tobe a hit, there is a 90% chance that the market research firmwill predict the show to be a hit. If the show is actuallygoing to be a flop, there is an 80% chance that the marketresearch firm will predict the show to be a flop. Determinehow the network can maximize its expected profits. Alsofind EVSI and EVPI.
The NBS television network earns an average of$400,000 from a hit show and loses an average of $100,000on a flop. Of all shows reviewed by the network, 25% turnout to be hits and 75% turn out to be flops. For $40,000, amarket research firm will have an audience view a pilot ofa prospective show and give its view about whether theshow will be a hit or a flop. If a show is actually going tobe a hit, there is a 90% chance that the market research firmwill predict the show to be a hit. If the show is actuallygoing to be a flop, there is an 80% chance that the marketresearch firm will predict the show to be a flop. Determinehow the network can maximize its expected profits. Alsofind EVSI and EVPI.
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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Question
The NBS television network earns an average of
$400,000 from a hit show and loses an average of $100,000
on a flop. Of all shows reviewed by the network, 25% turn
out to be hits and 75% turn out to be flops. For $40,000, a
a prospective show and give its view about whether the
show will be a hit or a flop. If a show is actually going tobe a hit, there is a 90% chance that the market research firm
will predict the show to be a hit. If the show is actually
going to be a flop, there is an 80% chance that the market
research firm will predict the show to be a flop. Determine
how the network can maximize its expected profits. Also
find EVSI and EVPI.
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