Lawsuit Defense Strategy
If Oceanview obtains the property and the zoning change is rejected in November, Glenn believes that the best optin would be for the firm not to complete the purchase of the property. In this case, Oceanview would forfeit the 10% deposit that accompanied the bid. Because the likelihood that the zoning referendum will be approved is such an important factor in the decision process, Glenn suggested that the firm hire a market research service to conduct a survey of voters. The survey would provide a better estimate of the likelihood that the referendum for a zoning change would be approved. The market research firm that Oceanview Development has worked with in the past has agreed to do the study for $15,000. The results of the study will be available August 1, so that Oceanview will have this information before the August 15 bid deadline. The results of the survey will be either a prediction that the zoning change will be approved or a prediction that the zoning change will be rejected. After considering the record of the market research service in previous studies conducted for Oceanview, Glenn developed the following probability estimates concerning the accuracy of the market research information:
P(A ƒ s1) = 0.9 P(A ƒ s2) = 0.2 P(N ƒ s1) = 0.1 P(N ƒ s2) = 0.8
A = N = s1 = s2 = prediction of zoning change approval prediction that zoning change will not be approved the zoning change is approved by the voters the zoning change is rejected by the voters
Managerial Report Perform an analysis of the problem facing the Oceanview Development Corporation, and prepare a report that summarizes your findings and recommendations. Include the following items in your report:
1. A decision tree that shows the logical sequence of the decision problem
2. A recommendation regarding what Oceanview should do if the market research information is not available
3. A decision strategy that Oceanview should follow if the market research is conducted
4. A recommendation as to whether Oceanview should employ the market research firm, along with the value of the information provided by the market research firm
