Acme multistage new product decisions with an option to buy information Inputs Cost of market research $150 Bayes' rule calculations Fixed marketing cost $2,000 Probabilities of predictions Unit margin $18 Good Bad Sum check 0.5 0.5 1 Market Prior probability Sales volume Net revenue Good 0.40 600 $10,800 Posterior probabilities, given predictions Bad 0.60 100 $1,800 Actual\Predicted Good Bad Good 0.64 0.16 Probabilities that indicate the accuracy of the predictions Bad 0.36 0.84 Actual\Predicted Good Bad Sum check Sum check 1 1 Good 0.8 0.2 1 Bad 0.3 0.7 1 64.0% 0.0% 10800 8650 TRUE Sales volume -2000 5410 36.0% 0.0% 1800 -350 50.0% Market product? 0 5410 FALSE 0.0% 0 -150 FALSE Prediction -150 3250 16.0% 0.0% 10800 8650 TRUE Sales volume -2000 1090 84.0% 0.0% 1800 -350 50.0% Market product? 0 1090 FALSE 0.0% 0 -150 Hire firm? 3400 40.0% 40.0% $10,800 8800 TRUE Sales volume -2000 3400 60.0% 60.0% $1,800 -200 TRUE Market product? 0 3400 FALSE 0.0% 0 0