Decision tree for medical professionals to reflect options

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Reference no: EM132219111

The course is Quantitive Research Methods and the book is Quantitive Analysis for Management (12 ed.) (Render, Stair, Jr., Hanna, & Hale, 2015). Boston, MA: Pearson.

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

(a) Develop a new decision tree for the medical professionals to reflect the options now open with the market study.

(b) Use the EMV approach to recommend a strategy.

(c) What is the expected value of sample information? How much might the physicians be willing to pay for a market study?

(d) Calculate the efficiency of this sample information.

Reference no: EM132219111

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