Super Cola is considering the introduction of a root beer drink. The company feels that the probability of the new drink being successful is .6. The payoff table is as follows. 
Super Cola has a choice of two research firms to obtain information for this new product. Stanton Marketing has market indicators I1 and I2 for which P(I1|S1) = .7 and P(I1|S2) = .4. New World Marketing has indicators J1 and J2 for which P(J1|S1) = .6 and P(J1|S2) = .3. (Be sure to compute probabilities to the third decimal place.)
a.What is the optimal decision if neither research firm is used?
b.Compute the expected value of perfect information (EVPI).
c.Find the EVSIs for Stanton and New World.
d.If both research firms charge $5,000, which firm should be hired?
e.If Stanton charges $10,000 and New World charges $5,000, which firm should Super Cola hire?
Definitions:
Truth Table
A table used in logic to compute and illustrate the possible truth values of logical expressions based on their components.
Atomic Sentences
Simple statements that contain no logical operators and cannot be broken down into simpler statements.
Truth Table
A table that displays the truth values of a logical expression based on all possible combinations of truth values of its variables.
Atomic Sentences
Simplest types of statements that cannot be broken down into smaller parts while maintaining propositional meaning.
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