Now suppose RMG is considering paying for marketing study to aid them make better decision regarding the location of their next retail outlet mall. If marketing study costs $5000, and for simplicity they've ruled out suburban site, answer following questions.
a. If the probability of a favorable study is 0.75 and an unfavorable study is 0.25, and the results of the study help RMG alter their probabilities of a good or bad economy as follows, draw a decision tree to reflect the options available to RMG, including whether to conduct the marketing study, and use the EMV approach to recommend a strategy.
P(good economy/favorable study) = 0.6
P(bad economy/favorable study) = 0.4
P(good economy/unfavorable study) = 0.35
P(bad economy/unfavorable study) = 0.65
b. What should RMG be willing to pay for the marketing study?
c. Calculate the efficiency of sample information and explain what it means.