Ian M. Funny is considering opening a bookstore near the USD campus, and he has begun an analysis of the situation. There are two possible sites under consideration. One is relatively small while the other is large. If he opens at the small site and demand is good, he will generate a profit of $50,000 provided the campus bookstore does not offer additional discounts to the students to counter the competition. If demand is low, he will lose $10,000. If he opens at the large site and demand is high, he will generate a profit of $80,000 provided the campus bookstore does not offer additional discounts to the students to counter the competition. At the large site, he will also lose $30,000 if the demand is low. If the campus bookstore offers additional discounts to students, this will reduce his profits by 40% of the projected profits given above. If the demand is high, there is a 90% probability that the campus bookstore will retaliate with additional discounts. If the demand is low, there is only 5% probability of the campus bookstore retaliating with additional discounts. He can also do nothing if neither of these options look attractive. He believes that there is a 60 percent chance that demand will be high. Determine the appropriate strategy for Mark using a decision tree. Showcase the strategy using words and a risk profile (a table and a histogram).
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