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Young screenpreparer Carl Draper has now completed his first script. It has action, humor, drama, and he believes it will be the blockbuster. He takes script to every motion picture studio in town and tries to sell it but to no benefit.

At last, an ACME studio presents to purchases the script, for either

(a) $10,000 or

(b) 1 percent of the movie's profits.

There are two decisions studio will have to make. First is to make a decision if script is good or bad, and second if movie is good or bad. First, there is 90 % probability that script is bad. If it is bad, studio does nothing more and throws script out. If script is good, it will shoot movie. After movie is shot, studio will review it and there is 70 % probability that movie is bad. If movie is bad, movie will not be promoted and will not turn the profit. If movie is good, studio will promote heavily and average profit for this kind of movie is $25 million.

Carl rejects $10,000 and says he wishes 1 percent of profits. Was this a good decision by Carl?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M931156

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