| Great_Gross | Medium_Gross | Small_Gross | |
| Probability | 0.1 | 0.6 | 0.3 |
| Turnip_Network | 900,000 | 900,000 | 900,000 |
| Mega_Studios | 3,000,000 | 1,000,000 | 200,000 |
LaLa must decide soon. Who should she sign with? What's the most she should consider paying for a forecast of the Gross?
7) Continuing with LaLa's problem, Srivastiva and Associates is a well
established Hollywood firm specializing in advising film figures and investors
on the potential success of cinematic efforts. They can have the script
for the film examined by a panel of experts, who would return either a
favorable (F) or unfavorable (U) verdict. Srivastiva's customary fee for
this service is $50,000, cash in advance. Their "Track Record" over the
past 5
years has been as follows:
| P(U|Great)=0.1 | P(U|Medium)=0.5 | P(U|Small)=0.8 |
| P(F|Great)=0.9 | P(F|Medium)=0.5 | P(F|Small)=0.2 |
a) Assuming that LaLa hires Srivastiva, what will be the values of the
joint and posterior probabilities?
b) This problem requires a decision tree. Please develop it.
c) Should LaLa engage the services of Srivastiva and Associates?
d) Including Srivastiva's fee, what is LaLa's Expected Value of Sample
Information?