# Probability of an unfavorable market given a

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probability of an unfavorable market given a favorable study = 0.18 probability of a favorable market given an unfavorable study = 0.11 probability of an unfavorable market given an unfavorable study = 0.89 probability of a favorable research study = 0.55 probability of an unfavorable research study = 0.45 (a) Develop a new decision tree for the medical professionals to reflect the options now open with the market study. (b) Use EMV approach to recommend a strategy. (c) What is the expected value of sample information? How much might the physicians be willing to pay for a market study?
3-32 Bill Holliday is not sure what he should do. He can either build a quadplex (i.e., a building with four apartments), build a duplex, gather information, or simply do nothing. If he gathers additional information, the results could be either favorable or unfavorable, but it would cost him \$3,000 to gather the information. Bill believes that there is a 50-50 chance that the information will be favorable. If the rental market is favorable, Bill will earn \$15,000 with the quadplex or \$5,000 with the duplex. Bill doesn’t have the financial resources to do both. With an