Decision Tree

Choice of the Best Alternative

Manahan Siallagan
 Exercise 3
 Budi was a marketing manager. He was assigned to assess the prospect of a
new product to be manufactured. The approximately production cost was
USD 90,000. If it had been sold out then it would gain revenue USD 500,000.
In other side, if he didn’t decide to produce then the company would loss
nothing. Based on his experience, he knew that 0.2 was the probability that
the market would accept the product. Even though, he wasn’t sure whether it
represented the current data. He had another option to run market research
and collect the last information, but it took investments as many as USD
10,000. Again, based on experience, he had known that if the customer
preferred the product then the survey would exhibit that the result was
favorable with probability 0.6. However, the probability would reduce to 0.1,
if the customer rejected.
 Now, help Budi to decide the best strategy! …. and … don’t forget to :
 Draw the tree diagram.
 Show us how did you get the probability…
 Thank You