A company is considering whether to market a new product. Assume, for simplicity, that if this product is marketed, there
a. Let p = 0.4. For which values of C, if any, would this company choose to conduct the consumer survey?
b. Let p = 0.4. What is the largest amount that this company would be willing to pay for perfect information about the potential success or failure of the new product?
c. Let p = 0.5 and C = $15,000. Find the strategy that maximizes the company’s expected earnings in this situation. Does the optimal strategy involve conducting the consumer survey? Explain why or why not.
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Question Posted: April 01, 2015 10:59:53