Super Cola is also considering the introduction of a root beer drink. The compan
ID: 443338 • Letter: S
Question
Super Cola is also considering the introduction of a root beer drink. The company feels that the probability that the product will be a success is .6. The payoff table is as follows: Success (s1) Failure (s2) Produce (d1) $250,000 -$300,000 Do Not Produce (d2) -$ 50,000 -$ 20,000 The company has a choice of two research firms to obtain information for this product. Stanton Marketing has market indicators, I1 and I2 for which P(I1 | s1) = .7 and P(I1 | s2) = .4. New World Marketing has indicators J1 and J2 for which P(J1 | s1) = .6 and P(J1 | s2) = .3. Find the EVSI for Stanton and New World.
Explanation / Answer
Given from the above data :
Super Cola company can make choice between 2 Research Firms : Stanton and New World.
Given the success of the product P(s1)= 0.6.
Calucating the Failure of the Product P(s2 )
P(s2) = 1- P(s1)
= 1- 0.6
= 0.4
Stanton Market Indicators :
P ( I1/ s1) = 0.7
P( I2/s2) = 0.4
New Worl Market Indicators :
P(J1/s1) = 0.6.
P(J2/s2) = 0.3.
Function s1 (low) s2 (high) d1 (high) 250000 300000 d2 (low) 50000 20000Related Questions
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