Michael is the owner of XYZ Inc from problems 1 and 2 and is considering his choices for the year to come. He can either sell just the original product line, both the original and the old product line, or can do nothing (completely shut down his business). The alternatives and associated payoffs under different market conditions are summarized below.AlternativeGood MarketFair MarketPoor market sells only the original Widget500 000250 000-400 000Sell Widget and Widget 2.0800 000300 000-900 000Do nothing000

Required:

1) What is the best decision to make if Michael is optimistic about the future?

2) What is the best decision to make if Michael is pessimistic about the future?

3) What is the best decision to make if Michael is neither completely optimistic nor completely pessimistic, but is somewhere in between (equally likely)?

4) What is the best decision to make if the scale from 0 to 100%, Michael is 35% optimistic?

5) What is the best decision to make If Michael believes that there is a 30% chance for a good market, a 50% chance for a fair market, and a 20% chance for a poor market?6) How much would Michael be willing to pay(maximum)to a marketing firm for a study of the expected market conditions?

Answer rating: 100% (QA)

ANSWER 1 If Michael is optimistic about the future the best decision to make is to sell the Widget and the Widget 2 This is because the expected payoff is the highest for this option at 800 000 The ex... View the full answer