The Super Cola Company must decide whether or not to introduce a new diet soft drink. Management feels that if it does introduce the diet soda it will yield a profit of $1 million if sales are around 100 million, a profit of $200,000 if sales are around 50 million, or it will lose $2 million if sales are only around 1 million bottles. If Super Cola does not market the new diet soda, it will suffer a loss of $400,000.
a. Construct a payoff table for this problem.
b. Construct a regret table for this problem.
c. Should Super Cola introduce the soda if the company: (1) is conservative; (2) is optimistic; (3) wants to minimize its maximum disappointment?
d. An internal marketing research study has found P(100 million in sales) = 1/3; P(50 million in sales) = 1/2; P(1 million in sales) = 1/6. Should Super Cola introduce the new diet soda?
e. A consulting firm can perform a more thorough study for $275,000. Should management have this study performed?