With Research 1 No Research F 0.59 2 U 0.41 d₁ 3 4 5 d₂ d₁ d₂ d₁ d₂ 6 7 8 9 10 11 $₁ 0.56 $₂0.44 S, 0.56 $₂ 0.44 S₁0.19 $₂ 0.81 $₁0.19 S₂ 0.81 S₁ 0.41 $₂ 0.59 S₁ 0.41 $₂ 0.59 200 600 800 400 200 600 800 400 200 600 800 400
Use the following information to answer questions 1 to 5.
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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