What is the value of the decision in given case

Reference no: EM132004145

Question: Mr. Schellburger, the CEO of Schellburger Oil, is facing a dilemma-He is not sure whether or not he should drill an oil well. His decision situation is captured by the following decision tree (all prospects are expressed in millions of dollars):

a. Assume Mr. Schellburger is risk neutral. Without any additional information, what will he choose? What is the value of his decision?

b. Fortunately, Mr. Schellburger has access to a detector which can give him some further information on whether or not the site contains oil. The detector is symmetric and has accuracy

c. Write out the Assessed Form probability tree. Be sure to include all labels and probabilities. c. Write out the Inferential Form probability tree. Be sure to include all labels and probabilities.

Reference no: EM132004145

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