Assume you are a manager of Blizzard (a computer game company) and you are considering the...

Transcribed Image Text:

Assume you are a manager of Blizzard (a computer game company) and you are considering the launch of a new game "StarCraft 4" (let SC4). You have sent out an RFP (request for proposal) to third-party market research firm (let "firm A") in the hopes of conducting some thorough market research for their new product launch (SC4). Based on the information from firm A's submission and based on their own knowledge of the game market, the product development team has summarized their state of prior knowledge as follows: We assume that there are three possible outcomes of the product launch for SC4: very successful (S1), somewhat successful (S2), and poor (S3) with corresponding profits of $S1-$5,000,000, SS2-$1,500,000 and $S3--$4,000,000 (loss) respectively. The historical probabilities for each of the three outcomes are Pr(S1)-0.1, Pr(S2)-0.3, and Pr(S3)-0.6. However, prior to launch, the product development team does not know which of these outcomes will occur. Firm A has agreed to tell the company which of the three outcomes will occur before the product launch, based on their market research. Let's assume that firm A is accurate in their predictions. . Based on this information, please answer the following questions. a) Assume that the game company cannot use the firm A for market research. Should it introduce the new product? Show your calculation for your decision using a decision tree. (1 point) b) What is the most you would pay for the Firm A's market research? Show your calculation using a decision tree. (1 point) Assume you are a manager of Blizzard (a computer game company) and you are considering the launch of a new game "StarCraft 4" (let SC4). You have sent out an RFP (request for proposal) to third-party market research firm (let "firm A") in the hopes of conducting some thorough market research for their new product launch (SC4). Based on the information from firm A's submission and based on their own knowledge of the game market, the product development team has summarized their state of prior knowledge as follows: We assume that there are three possible outcomes of the product launch for SC4: very successful (S1), somewhat successful (S2), and poor (S3) with corresponding profits of $S1-$5,000,000, SS2-$1,500,000 and $S3--$4,000,000 (loss) respectively. The historical probabilities for each of the three outcomes are Pr(S1)-0.1, Pr(S2)-0.3, and Pr(S3)-0.6. However, prior to launch, the product development team does not know which of these outcomes will occur. Firm A has agreed to tell the company which of the three outcomes will occur before the product launch, based on their market research. Let's assume that firm A is accurate in their predictions. . Based on this information, please answer the following questions. a) Assume that the game company cannot use the firm A for market research. Should it introduce the new product? Show your calculation for your decision using a decision tree. (1 point) b) What is the most you would pay for the Firm A's market research? Show your calculation using a decision tree. (1 point)