An Introduction to Management Science 13th Edition by David Anderson,Dennis Sweeney ,Thomas Williams ,Jeffrey Camm, Kipp Martin

Exercise 13

Consider a variation of the PDC decision tree shown in Figure 13.9. The company must first decide whether to undertake the market research study. If the market research study is conducted, the outcome will either be favorable ( F ) or unfavorable ( U ). Assume there are only two decision alternatives d 1 and d 2 and two states of nature s 1 and s 2. The payoff table showing profit it as follows:
a. Show the decision tree.
b. Using the following probabilities, what is the optimal decision strategy?