# Management of the New Fangled Softdrink Company believes that the probability of a customer purchasing Red Pop

## Question:

Management of the New Fangled Softdrink Company believes that the probability of a customer purchasing Red Pop or the companyâ€™s major competition, Super Cola, is based on the customerâ€™s most recent purchase. Suppose that the following transition probabilities are appropriate:

a. Show the two-period tree diagram for a customer who last purchased Red Pop. What is the probability that this customer purchases Red Pop on the second purchase?

b. What is the long-run market share for each of these two products?

c. A Red Pop advertising campaign is being planned to increase the probability of attracting Super Cola customers. Management believes that the new campaign will increase to 0.15 the probability of a customer switching from Super Cola to Red Pop. What is the projected effect of the advertising campaign on the marketshares?

## Step by Step Answer:

**Related Book For**

## Quantitative Methods for Business

**ISBN:** 978-0324651751

11th Edition

**Authors:** David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam