Problem 2 You are the author of what promises to be a successful novel. You have

Question

Problem 2 You are the author of what promises to be a successful novel. You have the option to either publish the novel yourself or use a publisher. The publisher is offering you $20,000 for signing the contract. If the novel is successful, it will sell 200,000 copies. If it isn't successful, it will sell 10,000 copies only. The publisher pays a $1 royalty per copy. Available data indicates that there is a 70% chance that the novel will be successful. If you undertake publishing, you will incur an initial cost of $90,000 for printing and marketing, but each copy sold will represent a $2 income for you a. Based on the given information, would you accept the publisher's offer or publish the novel yourself What is the maximum amount of money you would be willing to pay for a specialized survey by a literary agency regarding the potential success-or failure- of your novel? b. Suppose that, at a cost of $5,000, you can contract a literary agent to conduct a survey concerning the potential success of the novel. From past experiences of the literary agent, it is known that when a novel has been successful, the agent survey predicted the wrong outcome 25% of the time, when a novel has not been successful, the survey of the agent gave the correct prediction 86% of the time. Specify the decision strategy C. d. e. What is the value of the literary agent's information for you? What would be your decision strategy if you decide to use the agent's survey information? What is the "Efficiency" of the literary agent's survey?

Explanation / Answer

As the question is simple but little bit tricky.

A. Acceptance of publisher’s offer based on my knowledge if there are some chances of my book to become grossing and also if i have knowledge and financialy strong(risk taker) then its fine to publish it woth author.

But if i have confidence on myself and strong background then it’s good to publish myself.

B. It depends on situation or the person with whom i am dealing with i personally prefer him by giving small commissions on my sales so that even if the book doesn’t do well my losses will be low.

C. As literary agent plays of vast role in success of book because of it’s knowledge and experiences gained by him/her by practicing and examining the market.

D. Strategy would be simple of mine in this case listen everyone but take decision yourself so that you won’t regret later. I will ask agent but take decision myself but judging or examining the situation.

I think that agent is right at most of the times as you written in your question.

E. As efficiency answer is same as point D because survey agent has experience with him/her when agent is correct there are 25% chances of agent being correct same as my book have and if agent is wrong there are 86% chances in it so the decision will come good.

Stay positive think positive.

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