Question: It s time for an advertising firm to renew its contract
It’s time for an advertising firm to renew its contract with a client. The advertising firm wants the client to increase the amount it spends to advertise. If the firm proposes to continue the current contract, there’s a 75% chance that the client will accept the proposal. To increase the business will require a second proposal that has a 50% chance of approval. Alternatively, the advertising firm can begin the negotiations by proposing an elaborate advertising campaign. If it takes this approach, there’s a 40% chance that the client will approve the expanded proposal without needing a second proposal. Which approach should the advertising firm take if it wants to grow the business? Identify any assumptions you’ve made.
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