U.S. vaccine manufacturer Smith & Smith (S&S) is considering the acquisition of one or two small...

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U.S. vaccine manufacturer Smith & Smith (S&S) is considering the acquisition of one or two small plants to increase production. Payoffs are affected by a possible presence of a foreign competitor in the U.S. market: British vaccine manufacturer Cambridge is currently seeking FDA approval for its vaccine in the U.S. Acquiring both plants would be very profitable for S&S in case FDA does not approve Cambridge, but will hurt S&S profit if it does. Since plant B is larger than plant A. plant B generates higher payoffs without Cambridge and lower payoffs with Cambridge in the market, compared to plant A. Not acquiring neither plant would limit S&S profit without Cambridge competition but also could avoid losses in case Cambridge enters the U.S. market. Assume there is an 80% chance that the FDA will approve the use of Cambridge vaccine in the U.S. See payoff table below. Without Cambridge With Cambridge 0.2 0.8 Do not acquire any plant 24 18 Acquire plant A 29 16 Acquire plant B 32 12 Acquire both plants 37 10 What is the optimal decision based on Maximin? Acquire plant B Acquire plant A Acquire both plants Do not acquire any plant U.S. vaccine manufacturer Smith & Smith (S&S) is considering the acquisition of one or two small plants to increase production. Payoffs are affected by a possible presence of a foreign competitor in the U.S. market: British vaccine manufacturer Cambridge is currently seeking FDA approval for its vaccine in the U.S. Acquiring both plants would be very profitable for S&S in case FDA does not approve Cambridge, but will hurt S&S profit if it does. Since plant B is larger than plant A. plant B generates higher payoffs without Cambridge and lower payoffs with Cambridge in the market, compared to plant A. Not acquiring neither plant would limit S&S profit without Cambridge competition but also could avoid losses in case Cambridge enters the U.S. market. Assume there is an 80% chance that the FDA will approve the use of Cambridge vaccine in the U.S. See payoff table below. Without Cambridge With Cambridge 0.2 0.8 Do not acquire any plant 24 18 Acquire plant A 29 16 Acquire plant B 32 12 Acquire both plants 37 10 What is the optimal decision based on Maximin? Acquire plant B Acquire plant A Acquire both plants Do not acquire any plant

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Correct Answer Option 4 Do not acquire any ... View the full answer