A manager must choose either product line A or product line B for next year. Dem
ID: 3350279 • Letter: A
Question
A manager must choose either product line A or product line B for next year. Demand next year can be categorized as either On-The-Cheap or Upscale. The payoffs for the product lines under these demand states are as follows:
Product Line
Suppose the probability of an "Upscale" demand environment is 0.7. How much larger, in expected value, is the superior option to the inferior one? (If, say, the superior option has an expected value of 10 and the inferior option has an expected value of 8, the answer would be 2).
A manager must choose either product line A or product line B for next year. Demand next year can be categorized as either On-The-Cheap or Upscale. The payoffs for the product lines under these demand states are as follows:
Product Line
Demand State On The Cheap Upscale A 43 -12 B -5 49Suppose the probability of an "Upscale" demand environment is 0.7. How much larger, in expected value, is the superior option to the inferior one? (If, say, the superior option has an expected value of 10 and the inferior option has an expected value of 8, the answer would be 2).
Explanation / Answer
Product Line A - E(A) = 0.3* 43 - 12* 0.7 = 4.5
Product line B - E(B) = 0.3*-5 + 0.7*49 = 32.8
Answer = 32.8 - 4.5 = 28.3
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.