13 In the environment of increased competition, a fitness club executive is considering the purchase of additional

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13 In the environment of increased competition, a fitness club executive is considering the purchase of additional equipment. His alternatives, outcomes, and payoffs (profits) are shown in the following table:

EQUIPMENT FAVORABLE MARKET UNFAVORABLE MARKET Acme $400,000 - +175,000 Standard $280,000 - + 90,000 High Pro $ 95,000 - + 15,000

(a) If the executive is an optimistic decision maker, which alternative will he likely choose?

(b) If the executive is a pessimistic decision maker, which alternative will he likely choose?

(c) Market research suggests the chance of a favorable market for fitness clubs is 76%. If the executive uses this analysis, which alternative will he likely choose?

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