Question: The physicians in Problem 3-28 have been approached by a market research firm that offers to perform a study of the market at a fee of $5,000. The market researchers claim their experience enables them to use Bayes’ theorem to make the following statements of probability:

probability of a favorable market given a favorable study = 0.82

probability of an unfavorable market given a favorable study = 0.18

probability of a favorable market given - an unfavorable study = 0.11

probability of an unfavorable market given an unfavorable study = 0.89

probability of a favorable research study = 0.55

probability of an unfavorable research study = 0.45

1. Develop a new decision tree for the medical professionals to reflect the options now open with the market study.
2. Use the EMV approach to recommend a strategy.
3. What is the expected value of sample information? How much might the physicians be willing to pay for a market study?

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Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document