Starting with the finished version of Example 9.3, change the fixed marketing cost to $4000 (really $4

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Starting with the finished version of Example 9.3, change the fixed marketing cost to $4000 (really $4 million) in cell B5, and change the decision criterion to “maximize expected utility,” using an exponential utility function with risk tolerance $5000 (really $5 million). Display certainty equivalents on the tree. Is the company’s best strategy the same as with the EMV criterion? What is the EVI? (Hint: EVI is still the most Acme would be willing to pay in dollars for the marketing research firm’s predictions, and it can be calculated from certainty equivalents.)

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Practical Management Science

ISBN: 1497

5th Edition

Authors: Wayne L. Winston, Christian Albright

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