What decision should be made according to the emv decision

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Reference no: EM13251846

Morley Properties is planning to build a condominium development on St Simons Island, Georgia. The company is trying to decide between building a small, medium, or large development. The payoffs received for each size of development will depend on the market demad for condominiums in the area, which could be low, medium, or high. The payoff matrix for this decision problem is:

Market Demand
Size of Development Low Med High
Small 400 400 400
Medium 200 500 500
Large -400 300 800
(Payoffs in 1,000s)

The owner of the company estimates a 21.75% chance that market demand will be low, a 35.5% chance that it will be medium, and a 42.75% chance that it will be high.

What decision should be made according to the EMV decision rule? Solve using a decision tree.

Reference no: EM13251846

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