2- You own a shoe store and are deciding which shoes to stock for the upcoming season....
Question:
2- You own a shoe store and are deciding which shoes to stock for the upcoming season. You can either stock designer shoes, midrange shoes, or inexpensive shoes. If you stock designer shoes, you can stock either American designers or European designers. Based on which shoes you stock, your profits will be as follows: (For example, if you stock shoes by European Designers there is a 50% chance that your profits will be $80,000.) a) Use a decision tree to determine which shoes to stock in order to maximize expected profit. Make sure to report your decision strategy with its EMV. b) The probability of earning $50,000 when you stock inexpensive shoes is .3. How high would this probability need to be for you to decide to stock inexpensive shoes?
Managerial economics
ISBN: 978-1118041581
7th edition
Authors: william f. samuelson stephen g. marks