The bolt beverages company must decide whether or not to introduce a new sparkling drink.
Management feels that if it pushes through with introducing the sparkling drink it will yield a profit of 11 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 Bolt Beverages Company does not market the new sparkling drink, 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?