Hamilton Metaverse Network must decide on which one of two new metaverse games to create: HEXAGO or AVAXO. The costs of producing and operating the two games are similar and the average monthly subscription for either game could be low (19,000 subscribers), medium (70,000 subscribers), or high (142,000 subscribers). If the company chooses to create HEXAGO, they will charge $20 per account for monthly subscription, and the probabilities of low and medium subscriptions are 0.21 and 0.35 respectively. For AVAXO, there is a 42% chance that a competitive game will appear on the market. The probability of low subscription is 0.14 if no competitive game appears. and 0.4 if a competitive game appears. The probability of medium subscription is 0.26 whether or not competition appears. The company will charge $26/month per account for subscription to AVAXO if no competitive game appears but will only charge $16/month if competition appears. Construct a decision tree for the problem, where payoffs are total monthly subscription in dollars. For example, if HEXAGO is created and subscription is low, then subscription dollars will be $20*19000 $380,000. Report answers accurate to the nearest dollar. a. What is the expected monetary value for HEXAGO? b. What is the expected monetary value for AVAXO if there is no competition? c. What is the expected monetary value for AVAXO if competition appears? $ d. What is the expected monetary value for AVAXO? e. What is the expected monetary value of the optimal decision? f. What is the optimal decision?
