The marketing department of a soft drink company wishes to determine the best investment level (Low, High) for introducing a new crystal-clear drink. The payoffs depending on market share for the two decision alternatives is given below: Market Share Investment Level < 1% 1% - 4% > 4% Low 300,000 400,000 500,000 High -400,000 300,000 3,000,000 The probability for a market share less than 1% is 0.3 and the probability for a market share more than 4% is 0.2. a) To minimize the maximum regret, which investment level should the department choose? b) To maximize expected values, which investment level should the department choose? c) What is the maximum amount the department should spend to get more information about the possible market share?
The marketing department of a soft drink company wishes to determine the best investment level (Low, High) for introducing a new crystal-clear drink. The payoffs depending on market share for the two decision alternatives is given below: Market Share Investment Level < 1% 1% - 4% > 4% Low 300,000 400,000 500,000 High -400,000 300,000 3,000,000 The probability for a market share less than 1% is 0.3 and the probability for a market share more than 4% is 0.2. a) To minimize the maximum regret, which investment level should the department choose? b) To maximize expected values, which investment level should the department choose? c) What is the maximum amount the department should spend to get more information about the possible market share?
Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter10: Statistics
Section10.6: Summarizing Categorical Data
Problem 10CYU
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The marketing department of a soft drink company wishes to determine the best investment level (Low, High) for introducing a new crystal-clear drink. The payoffs depending on market share for the two decision alternatives is given below:
| Market Share | |||
| Investment Level | < 1% | 1% - 4% | > 4% |
| Low | 300,000 | 400,000 | 500,000 |
| High | -400,000 | 300,000 | 3,000,000 |
The probability for a market share less than 1% is 0.3 and the probability for a market share more than 4% is 0.2.
a) To minimize the maximum regret, which investment level should the department choose?
b) To maximize
c) What is the maximum amount the department should spend to get more information about the possible market share?
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