A company has to choose between three mutually exclusive projects. Market research has shown that customers could react to the projects in three different ways depending on their preferences. There is a 30% chance that customers will exhibit preferences 1, a 20% chance they will exhibit preferences 2 and a 50% chance they will exhibit preferences 3. The company uses expected value to make this type of decision. The net present value of each of the possible outcomes is as follows: A market research company believes it can provide perfect information about the preferences of customers in this market. What is the maximum amount that should be paid for the information from the market research company?

Question

A company has to choose between three mutually exclusive projects. Market research has shown that customers could react to the projects in three different ways depending on their preferences. There is a 30% chance that customers will exhibit preferences 1, a 20% chance they will exhibit preferences 2 and a 50% chance they will exhibit preferences 3. The company uses expected value to make this type of decision. The net present value of each of the possible outcomes is as follows:  A market research company believes it can provide perfect information about the preferences of customers in this market. What is the maximum amount that should be paid for the information from the market research company?

Quizplus · Accepted Answer

The Answer of A company has to choose between three mutually exclusive projects. Market research has shown that customers could react to the projects in three different ways depending on their preferences. There is a 30% chance that customers will exhibit preferences 1, a 20% chance they will exhibit preferences 2 and a 50% chance they will exhibit preferences 3. The company uses expected value to make this type of decision. The net present value of each of the possible outcomes is as follows:  A market research company believes it can provide perfect information about the preferences of customers in this market. What is the maximum amount that should be paid for the information from the market research company?

A Company Has to Choose Between Three Mutually Exclusive Projects