HALEâS TV PRODUCTION IS CONSIDERING PRODUCING A PILOT FOR A COMEDY SERIES IN THE HOPE OF SELLING IT TO A MAJOR TV NETWORK. THE NETWORK MAY REJECT THE SERIES BUT IT MAY ALSO DECIDE TO PURCHASE THE RIGHTS TO THE SERIES FOR EITHER 1 OR 2 YEARS. AT THIS POINT IN TIME, HALE MAY EITHER PRODUCE THE PILOT AND WAIT FOR THE NETWORKS DECSION TO TRANSFER THE RIGHTS FOR THE PILOT AND SERIES TO A COMPETITIOR FOR $100,000.00. HALEâS 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 PROBABLITITIES FOR THE STATE OF NATURES ARE P(s1)=0.20, P(s2)=0.30, AND P(s3)=0.50. FOR ACONSULTING FEE OF $5,000.00, 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 UNFAVORABLE (U) REVIEW AND THAT THE FOLLOWING PROBABLITIES ARE RELEVANT:

P(F/S1)=0.3105 P(U/S1)=0.6975

P(F/S2)=0.5980 P(U/S2)=0.4030

P(F/S3)=0.8970 P(U/S3)=0.0992

a) CONSTRUCT A DECSION TREE

b) WHAT IS THE RECOMMNEDED DECSION IF AGENCY IS NOT USED? WHAT IS THE EXPECTED VALUE?

c) WHAT IS THE EXPECTED VALUE OF PERFECT INFORMATION?

d) WHAT IS HALEâS OPTIMAL DECISION STRATEGY ASSUMING THE AGENCYS INFO IS USED?

e) WHAT IS THE EXPECTED VALUE OF THE AGENCYS INFO?

f) IS THE AGENCY INFO WORTH THE FEE OF $5,000.00? WHAT IS THE MAXIMUM HALE SHOULD BE WILING TO PAY FOR THE INFO?

g) WHAT IS THE RECOMMENDED DECISION?