How much should you ask the Managing Director to pay you for answering the question as to whose estimates (Andrew, Belinda or Cynthia) to take a decision by?

Subject(s): Business–Quantitative Finance

Q4. The bakery is contemplating the addition of a new range of products. There are differing viewpoints on the viability of this addition. The Managing Director of the bakery relies on three key advisors – Andrew, the Master baker, Belinda the Sales manager and Cynthia the Marketing manager. Andrew is very optimistic about the new product line, Belinda is pessimistic and Cynthia as a veteran marketer is a realist. They have given their best estimates of sales under three different market conditions.

Andrew
Belinda
Cynthia
Not good market
30% probability
?
15
20
Good market
40% probability
?
30
45
Excellent market
30% proba

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Unfortunately, Andrew wrote his numbers on a greasy sheet of paper and disappeared for the rest of the day. All you can make out are the numbers 25 and 75. Use the last two digits of your z-number as the third number in Andrew’s estimate. Put the three numbers (25, 75 and your last two digits) in increasing order and take it as Andrew’s three estimates for Not good, Good and Excellent markets respectively. How much should you ask the Managing Director to pay you for answering the question as to whose estimates (Andrew, Belinda or Cynthia) to take a decision by?

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