A government committee is considering the economic benefits of a programme of preventative flu vaccinations. If vaccinations are not introduced then the estimated cost to the government if flu strikes in the next year is $7m with probability 0.1, $10m with probability 0.3 and $15m with probability 0.6. It is estimated that such a programme will cost $7m and that the probability of flu striking in the next year is 0.75.
One alternative open to the committee is to institute an "early-warning" monitoring scheme (costing $3m) which will enable it to detect an outbreak of flu early and hence institute a rush vaccination programme (costing $10m because of the need to vaccinate quickly before the outbreak spreads). With the aid of a decision tree, determine, quantitatively, the optimal c ourse of action the committee should take.