Advertising strategies decisions. For the payoff table in Exercise 13, find the action with the highest expected value. a) If forecasters think the probability of rising consumer confidence is 0.70, what is its expected value? b) What action would have the highest expected value if they think the probability of rising consumer confidence is only 0.40?

Exercise 13

Advertising strategies. After a series of extensive meetings, several of the key decision makers for a small marketing firm have produced the following payoff table (expected profit per customer) for various advertising strategies and two possible states of the economy.

Construct a decision tree for this payoff table.