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Bulloch County has never allowed liquor to be sold in restaurants. However in 3 months, county residents are scheduled to vote on a referendum to allow liquor to be sold by the drink. Currently, polls indicate there is a 60% chance that the referendum will be passed by voters. Phil Jackson is a local real estate speculator who is eyeing a closed restaurant building that is scheduled to be sol at a sealed bid auction. Phil estimates that if he bids 1.2 million there is a 25% chance he will obtain the property, if he bids 1.45 million, there is a 45% chance he will obtain the property. If he acquires the property and the referendum passes Phil believes he could then sell the property for 2.2 million. However if the referendum fails, he believes he could see the property for only $1.15 million.

A- develop a decision tree for only $1.15 million
B- What is the optimal decision according to the EMV criterion?

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M943750

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