Reference no: EM13902291
The physicians in Problem 3-36 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
Develop a new decision tree for the medical professionals to reflect the options now open with the market study.
Use the EMV approach to recommend a strategy.
What is the expected value of sample information? How much might the physicians be willing to pay for the market study?
Calculate the efficiency of this sample information.
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