Modern Business Statistics with Microsoft Office Excel (with XLSTAT Education Edition Printed Access Card) (MindTap Course List)
6th Edition
ISBN: 9781337115186
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
Publisher: Cengage Learning
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Textbook Question
Chapter 20.3, Problem 11E
Hale’s TV Productions is considering producing a pilot for a comedy series in the hope of selling it to a major television network. The network may decide to reject the series, but it may also decide to purchase the rights to the series for either one or two years. At this point in time, Hale may either produce the pilot and wait for the network’s decision or transfer the rights for the pilot and series to a competitor for $100,000. Hale’s decision alternatives and profits (in thousands of dollars) are as follows:
The probabilities for the states of nature are P(s1) = .2, P(s2) = .3, and P(s3) = .5. For a consulting fee of $5000, an agency will review the plans for the comedy series and indicate the overall chances of a favorable network reaction to the series. Assume that the agency review will result in a favorable (F) or an unfavorable (U) review and that the following probabilities are relevant.
| P(F) = .69 | P(s1 | F) = .09 | P(s1 | U) = .45 |
| P(U) = .31 | P(s2 | F) = .26 | P(s2 | U) = .39 |
| P(s3 | F) = .65 | P(s3 | U) = .16 |
- a. Construct a decision tree for this problem.
- b. What is the recommended decision if the agency opinion is not used? What is the
expected value ? - c. W hat is the expected value of perfect information?
- d. What is Hale’s optimal decision strategy assuming the agency’s information is used?
- e. What is the expected value of the agency’s information?
- f. Is the agency’s information worth the $5000 fee? What is the maximum that Hale should be willing to pay for the information?
- g. What is the recommended decision?
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Hale's Productions is considering producing a pilot for a comedy series in the hope of selling it to a major streaming service. The streaming service may decide to reject the series, but it
may also decide to purchase the rights to the series for either one or two years. At this point in time, Hale may either produce the pilot and wait for the streaming service's decision or
transfer the rights for the pilot and series to a competitor for $100,000. Hale's decision alternatives and profits (in thousands of dollars) are as follows:
Decision Alternative
Produce pilot, d₁
Sell to competitor, d₂
P(F) = 0.69
P(U) =
= 0.31
P(S₁IF): = 0.08
P(S₂|F) = 0.28
P(S3|F) = 0.64
Decision Tree
Agency
No Agency
Reject, S₁
2
The probabilities for the states of nature are P(S₁) = 0.1947, P(S₂) = 0.3141, and P(S3) = 0.4912. For a consulting fee of $5,000, an agency will review the plans for the comedy series
and indicate the overall chances of a favorable streaming service reaction to the series. Assume that…
Hale's Productions is considering producing a pilot for a comedy series in the hope of selling it to a major streaming service. The
streaming service may decide to reject the series, but it may also decide to purchase the rights to the series for either one or two
years. At this point in time, Hale may either produce the pilot and wait for the streaming service's decision or transfer the rights
for the pilot and series to a competitor for $100,000. Hale's decision alternatives and profits (in thousands of dollars) are as
follows:
Decision Alternative
Produce pilot, d₁
Sell to competitor, d₂
P(F) = 0.69
P(U) = 0.31
P(S₁IF) = 0.08
= 0.28
P(S₂IF)
P(S3|F) = 0.64
Agency
1
No Agency
Reject, S1
2
The probabilities for the states of nature are P(S₁) = 0.1947, P(S₂) = 0.3141, and P(S3) = 0.4912. For a consulting fee of $5,000,
an agency will review the plans for the comedy series and indicate the overall chances a favorable streaming service reaction to
the series. Assume that the agency review…
Hale's TV Productions is considering producing a pilot for a comedy series in the hope of selling it to a major television network. The network may decide to reject the series, but it may also decide to purchase the rights to the series for either one or two years. At this point in time, Hale may either produce the pilot and wait for the network's decision or transfer the rights for the pilot and series to a competitor for $100,000. Hale's decision alternatives and profits (in thousands of dollars) are as follows:
State of Nature
Decision Alternative
Reject, S1
1 Year, S2
2 Years, S3
Produce pilot, d1
-100
50
150
Sell to competitor, d2
100
100
100
The probabilities for the states of nature are P(S1) = 0.20, P(S2) = 0.30, and P(S3) = 0.50. For a consulting fee of $5,000, an agency will review the plans for the comedy series and indicate the overall chances of a favorable network reaction to the series. Assume that the agency review will result in a favorable (F) or an…
Chapter 20 Solutions
Modern Business Statistics with Microsoft Office Excel (with XLSTAT Education Edition Printed Access Card) (MindTap Course List)
Ch. 20.2 - Prob. 1ECh. 20.2 - Prob. 2ECh. 20.2 - 3. Hudson Corporation is considering three options...Ch. 20.2 - 4. Myrtle Air Express decided to offer direct...Ch. 20.2 - 5. The distance from Potsdam to larger markets and...Ch. 20.2 - 6. Seneca Hill Winery recently purchased land for...Ch. 20.2 - 7. The Lake Placid Town Council has decided to...Ch. 20.3 - Consider a variation of the PDC decision tree...Ch. 20.3 - 9. A real estate investor has the opportunity to...Ch. 20.3 - Dante Development Corporation is considering...
Ch. 20.3 - 11. Hale’s TV Productions is considering producing...Ch. 20.3 - 12. Martin’s Service Station is considering...Ch. 20.3 - 13. Lawson’s Department Store faces a buying...Ch. 20.4 - Prob. 14ECh. 20.4 - 15. In the following profit payoff table for a...Ch. 20.4 - 16. To save on expenses, Rona and Jerry agreed to...Ch. 20.4 - 17. The Gorman Manufacturing Company must decide...Ch. 20 - Prob. 18SECh. 20 - 19. Warren Lloyd is interested in leasing a new...Ch. 20 - Hemmingway, Inc., is considering a $50 million...Ch. 20 - 21. Embassy Publishing Company received a...Ch. 20 - Case Problem Lawsuit Defense Strategy
John...
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