A real estate investor has the opportunity to purchase land currently zoned residential. If the county board approves a request to rezone the property as commercial within the next year, the investor will be able to lease the land to a large discount firm that wants to open a new store on the property. However, if the zoning change is not approved, the investor will have to sell the property at a loss. Profits (in thousands of dollars) are shown in the following payoff table:
State of Nature | ||
Rezoning Approved | Rezoning Not Approved | |
Decision Alternative | S1 | S2 |
Purchase, d1 | 640 | -200 |
Do not purchase, d2 | 0 | 0 |
Let H = High resistance to rezoning | ||
L = Low resistance to rezoning | ||
P(H) = 0.51 | P(S1 | H) = 0.16 | P(S2 | H) = 0.84 |
P(L) = 0.49 | P(S1 | L) = 0.85 | P(S2 | L) = 0.15 |
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