a. You are about to introduce fruit gift box, which is a great gift for birthday or
Question:
a. You are about to introduce fruit gift box, which is a great gift for birthday or to wish someone a fast recovery. You are very confident that this fruit gift box will be a great success and want to introduce it immediately without advertising. Your business partner, Eric sees it differently and he suggests launching an advertising campaign. The advertising campaign will cost RM 500 and if successful will produce RM 5,000 revenue. If the campaign is unsuccessful (which there is a 25% chance it would), the revenue is estimated at only RM 1,000. If no advertising is used, the revenue is estimated at RM 3,000 with probability of 0.7 if customers are receptive to this fruit gift box and RM 1,000 with probability of 0.3 if they are not. If no advertising is used, you are thinking to ask Olivia to conduct a market survey. The survey cost is RM 250. The survey will be positive or negative, indicating either a good or poor response from customers. Past experiences suggested that the probability of positive is 0.7. The probabilities when no advertising is used will then be revised based on whether the survey is positive or negative. If the survey is positive, the probability that a customer is receptive to this fruit gift box is 0.85. If the survey is negative, the probability that a customer is receptive to this fruit gift box is 0.45. Use R to construct a decision tree and identify the best decision for your plan!
1b. A florist shop ABC plans to sell a similar fruit gift box. You are considering three possibilities to promote: (I) better packaging, (II) increase advertising, and (III) slight reduction in price. Each gain in your shop will result in an identical loss in shop ABC. Identify whether the above problem has a pure strategy solution. Then, determine the strategy you should use to promote the fruit gift box. The table below shows the percentage of increase or decrease of sales for your shop using the three possibilities:
| Shop ABC(%) | Shop ABC(%) | Shop ABC(%) | ||
| I | II | III | ||
| Your Shop (%) | I | 9 | 7 | 2 |
| Your Shop (%) | II | 11 | 8 | 4 |
| Your Shop (%) | III | 4 | 1 | -7 |
Expert Answer:
First of all let understand what is a decision tree A Decision Tree is a nonparametric method used f... View the full answer
