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ABC Industries is considering a clever food mixer as a new consumer product. They have no idea whether or not the XYZ Co. will come out with a competitive product. The following table shows all the individual alternatives with corresponding payoffs or losses. Determine the net payoff (or loss) using the Hurwicz's criterion of realism of \alpha =0.3.(Hint: look carefully at the words "profit" and "loss").
Alternative
Payoff or loss
If ABC adds an assembly line for the product and XYZ does not follow with a competitive product, their expected profit is:
$35,000
If ABC add an assembly line and XYZ does follow, they still expect a loss of:
$10,000
If ABC adds a new plant addition and XYZ does not produce a competitive product, they expect a profit of:
$500,000
If XYZ does compete for this market, ABC expects a loss of:
$450,000
A.
-$315,000
B.
$150,000
C.
-$38,400
D.
-$165,000
E.
$150,200

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