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Decision trees

 
 
Reply Sat 26 Feb, 2011 01:08 pm
I need help formulating a decision tree for the following question:
123 Company is considering a new consumer product. They think that the 456 Company may come out with a competing product, with probability of 0.6. If 123 adds an assembly line for the product and 456 does not follow with a competitive product, the expected profit is $40K; if they add an assembly line and 456 does follow, they still expect a $5k profit. If 123 adds a new plant addition and 456 does not produce a competitive product, they expect a profit of $150K; if 456 does compete they expect a loss of $35K. Please construct a decision tree model.
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