Determine the probability percentage

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Reference no: EM133447386

Question: Meredith Delgado owns a small firm that has developed software for organizing and playing music on a computer. Her software contains a number of unique features that she has patented so her company's future has looked bright. However, there now has been an ominous development. It appears that a number of her patented features were copied in similar software developed by MusicMan Software, a huge software company with annual sales revenue in excess of $1 billion. Meredith is distressed. MusicMan Software has stolen her ideas and that company's marketing power is likely to enable it to capture the market and drive Meredith out of business.

In response, Meredith has sued MusicMan Software for patent infringement. If she goes to trial, her attorney fees and other expenses is expected to be $1.25 million. If she wins, she expects to win for a settlement of $4.25 Million. This means that she will only net $3 Million if she goes to trial. If she loses the case, she gets nothing and she loses all the attorney fees and other expenses. Music Man Software has offered Meredith $1million to settle this case out of court. She will get $0, if she doesn't settle or lose.

A. Use the Bayes' Decision Rule and the Decision Model to determine the probability percentage that provides Meredith a bigger Expected Payoff for winning the case if she goes to trial. Construct a Bayes' model and show your work.

B. Using your Bayes' Decision Rule Model. Analyze the Prior Probability of Winning and Prior Probability of Losing. Provide the Go to Trial Expected Profit (EP)...and Provide the Settle (EP). In column J, write Y or N at the points for each probability array.

C. Set the values of your prior probabilities to the percentages to the point where Go To Trial EP is just higher than the Settle EP Before you turn this in.

Reference no: EM133447386

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