Super Cola is considering the introduction of a root beer drink. The company thinks the probability...
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Super Cola is considering the introduction of a root beer drink. The company thinks the probability that the product will be a success is 0.6. See the following payoff table. Produce (d₂) Do not produce (d₂) The company has a choice of two research firms to obtain information for this product. Stanton Marketing has market indicators I and I₂ for which P(I, IS₁) = 0.7 and P(I₂ | s₂) = 0.4. New World Marketing has indicators J, and J₂ for which P(J₁ | 5₂) = 0.6 and P(J, IS₂) = 0.3. Success (S₁) Fail (5₂) (b) What is the EVPI (in $)? $251,000-$301,000 (a) What is the optimal decision if neither firm is used? O produce the drink -$52,000 do not produce the drink Over what probability of success range is this decision optimal? The decision remains optimal as long as the success probability is greater than or equal to equal to -$19,000 (c) Find the EVSI for Stanton (in $). $ Find the efficiency (as a %) for Stanton. (Round your answer to one decimal place.) Stanton New World Find the EVSI for the New World (in $). $ Find the efficiency (as a %) for the New World. (Round your answer to one decimal place.) (d) If both firms charge $5,000, which firm should be hired? Stanton New World (e) If Stanton charges $10,000 and New World charges $4,000, which firm should Super Cola hire? and less than or Super Cola is considering the introduction of a root beer drink. The company thinks the probability that the product will be a success is 0.6. See the following payoff table. Produce (d₂) Do not produce (d₂) The company has a choice of two research firms to obtain information for this product. Stanton Marketing has market indicators I and I₂ for which P(I, IS₁) = 0.7 and P(I₂ | s₂) = 0.4. New World Marketing has indicators J, and J₂ for which P(J₁ | 5₂) = 0.6 and P(J, IS₂) = 0.3. Success (S₁) Fail (5₂) (b) What is the EVPI (in $)? $251,000-$301,000 (a) What is the optimal decision if neither firm is used? O produce the drink -$52,000 do not produce the drink Over what probability of success range is this decision optimal? The decision remains optimal as long as the success probability is greater than or equal to equal to -$19,000 (c) Find the EVSI for Stanton (in $). $ Find the efficiency (as a %) for Stanton. (Round your answer to one decimal place.) Stanton New World Find the EVSI for the New World (in $). $ Find the efficiency (as a %) for the New World. (Round your answer to one decimal place.) (d) If both firms charge $5,000, which firm should be hired? Stanton New World (e) If Stanton charges $10,000 and New World charges $4,000, which firm should Super Cola hire? and less than or
Expert Answer:
Answer rating: 100% (QA)
To find the optimal decision and other relevant values we can use the Expected Monetary Value EMV approach EMV is calculated as the sum of the products of each outcomes probability and its associated ... View the full answer
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
Posted Date:
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