Bundle: Statistics for Business & Economics, Loose-leaf Version, 13th + MindTap Business Statistics with XLSTAT, 2 terms (12 months) Printed Access Card
13th Edition
ISBN: 9781337127264
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
Publisher: Cengage Learning
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Textbook Question
Chapter 21.3, Problem 8E
Consider a variation of the PDC decision tree shown in Figure 21.5. The company must first decide whether to undertake the market research study. If the market research study is conducted, the outcome will either be favorable (F) or unfavorable (U). Assume there are only two decision alternatives d1 and d2 and two states of nature s1 and s2. The payoff table showing profit is as follows:
| State of Nature | ||
| Decision Alternative | s1 | s2 |
| d1 | 100 | 300 |
| d2 | 400 | 200 |
- a. Show the decision tree.
- b. Use the following probabilities. What is the optimal decision strategy?
| P(F) = .56 | P(s1 | F) = .57 | P(s1 | U) = .18 | P(s1) = .40 |
| P(U) = .44 | P(s2 | F) = .43 | P(s2 | U) = .82 | P(s2) = .60 |
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Chapter 21 Solutions
Bundle: Statistics for Business & Economics, Loose-leaf Version, 13th + MindTap Business Statistics with XLSTAT, 2 terms (12 months) Printed Access Card
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