Determine the efficiency of market research

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The management company should first decide whether to undertake market research survey. If market research study is perfromed, outcome will either be favorable (F) or unfavorable (U). Suppose there are only two decision alternatives, D1 and D2, and two states of nature, S1 and S2. Payoff table showing profit is as follows:

State of Nature
Decision Alternative S1 S2
D1 100 300
D2 400 200

a) Using following probabilities, determine the optimal decision strategy?

P(F)=0.56 P(S1/F)=0.57 P(S1/U)=0.18 P(S1)=0.40
P(U)=0.44 P(S2/F)=0.43 P(S2/U)=0.82 P(S2)=0.60

b) Determine the Efficiency of this market research. What would be your suggestions?

c) How much will this company be eager to pay for this market research?

Reference no: EM13110271

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