Following is the payoff table for the Pittsburgh DevelopmentCorporation (PDC) Condominium Project. Amounts are in millions ofdollars.
| State of Nature |
| Decision Alternative | Strong Demand S1 | Weak Demand S2 |
| Small complex, d1 | 7 | 5 |
| Medium complex, d2 | 14 | 4 |
| Large complex, d3 | 20 | -8 |
Suppose PDC is optimistic about the potential for the luxuryhigh-rise condominium complex and that this optimism leads to aninitial subjective probability assessment of 0.8 that demand willbe strong (S1) and a corresponding probabilityof 0.2 that demand will be weak (S2). Assumethe decision alternative to build the large condominium complex wasfound to be optimal using the expected value approach. Also, asensitivity analysis was conducted for the payoffs associated withthis decision alternative. It was found that the large complexremained optimal as long as the payoff for the strong demand wasgreater than or equal to $17 million and as long as the payoff forthe weak demand was greater than or equal to -$20 million.
A) Consider the medium complex decision. How much could thepayoff under strong demand increase and still keep decisionalternative d3 the optimal solution? Ifrequired, round your answer to two decimal places.The payoff forthe medium complex under strong demand remains less than or equalto $ ________ million, the large complexremains the best decision.
B) Consider the small complex decision. How much could thepayoff under strong demand increase and still keep decisionalternative d3 the optimal solution? Ifrequired, round your answer to two decimal places. The payoff forthe small complex under strong demand remains less than or equal to$________ million, the large complexremains the best decision.
