- An Entertainment Company Is Organizing A Pop Concert In London The Company Has To Decide How Much It Should Spend On Pu 1 (43.47 KiB) Viewed 35 times
- An Entertainment Company Is Organizing A Pop Concert In London The Company Has To Decide How Much It Should Spend On Pu 2 (8.8 KiB) Viewed 35 times
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An entertainment
company is organizing a pop concert in London. The
company has to decide how much it should spend on publicizing the event and three options have been identified: Option 1: Advertise only in the music press: Option 2: As option 1 but also advertise in the national press: Option3: Asoptionsland2butalsoadvertiseoncommercialradio. For simplicity, the demand for tickets is categorized as low, medium, or high. The payoff table below shows how the profit which the
company will earn for each option depends on the level of demand. Profits ($000) Demand Option 1 Medium -20 Low -20 -60 -100 High 100 60 20 2 -20 3 -60 It is estimated that if option 1 is adopted the probabilities of low, medium, and high demand are 0.4.0.5, and 0.1. respectively. For option 2 the respective probabilities are 0.1,0.3 and 0.6 while for option 3 they are 0.05, 0.15 and 0.8. Build the decision tree and answer the following
questions. What is the expected profit of option 1 (in Sk)? -20 B 28 40 E-8
What is the expected profit of option 2 (in $k)? -20 -24 D 24 6 -36
What is the expected profit of option 3 (in $k)? A-62 (B-50 -80 C -2