Answer Happy

A candy company is considering a new type of candy bar. It can either produce the new candy bar (dı) or sell the formula to a competitor (dz) and the sale will either be low ( 5 ) or high ( 52 ). The profits are shown in the payoff table below. State of Nature Decision Altemative Low, 5, Medium, 52 $3,000 d. Produce, $1,100 $4,000 $500 Sell, d2 = = = A market study can be performed to determine whether the new candy bar appeals to consumers. The study will either recommend (R) or not recommend (N) producing the new candy bar with probabilities P(R) = .3 and P(N) = .7. The prior probabilities are P(s) = 40 and P(s) = 45, and the posterior probabilities are P(1|R) = 40, P(s, R)= .60, P(s1|N) = 72, and P(2N) = 28. What is the expected value of the market study's information? = a. $620 b. $1,224 c. $349 d. $738