A market research survey is available for $10,000.Using a decision tree analysis, it is found that the expected monetary value with no survey is $62,000.If the expected value of sample information is -$7,000, what is the expected monetary value with the survey?
A)$45,000
B)$62,000
C)-$17,000
D)$55,000

Question

Quizplus · Accepted Answer

The expected monetary value (EMV) with no survey is $62,000.

The expected value of sample information (EVSI) is -$7,000, which means that the survey has some value in reducing uncertainty, but it is not worth the full cost of $10,000.

To calculate the expected monetary value with the survey, we need to consider the expected value of perfect information (EVPI), which represents the maximum value that could be gained from perfect information (i.e. knowing exactly what the market wants).

If the EVPI is less than $10,000 (i.e. the cost of the survey), then it would not be worth conducting the survey.

In this case, we do not have information about the EVPI, but given that the EVSI is negative, it is unlikely that the EVPI would be high enough to justify the cost of the survey.

Therefore, the best choice is to not conduct the survey and stick with the EMV of $62,000.

A Market Research Survey Is Available for $10,000