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Determine which type of dealership the couple should purchase

Construct a decision tree for decision situation described in problem 25 and indicate the best decision

Decision Analysis

Question 25) Fenton and Farrah Friendly, husband and wife car dealers, are soon going to open a new dealership. They have three offers: from a foreign compact car company, from a U.S. producer of full -sized cars, and from a truck company. The success of each type of dealership depends on how much gasoline will be available during the next few years. The profit from each type of dealership, given the availability if gas shown in the following payoff table:

Gasoline Availability

Dealership Shortage Surplus
.6 .4

Compact cars $ 300,000 $ 150,000
Full sized -cars - 100,000 600,000
Trucks 120,000 170,000

Determine which type of dealership the couple should purchase.

Solution Preview

Question 25) Fenton and Farrah Friendly, husband and wife car dealers, are soon going to open a new dealership. They have three offers: from a foreign compact car company, from a U.S. producer of full -sized cars, and ...

Solution Summary

The expert determines which type of dealership the couple should purchase. A decision tree is construction.

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