Question
(16 points) Blackbeard's Phantom Fireworks is considering two new bottle rockets. The company can add both to the current line, neither, or just one of
- (16 points) Blackbeard's Phantom Fireworks is considering two new bottle rockets. The company can add both to the current line, neither, or just one of the two. The success of these products depends on consumers' reactions to the products. These reactions can be summarized as good, P(S1) = 0.30; fair, P(S2) = 0.50; or poor, P(S3) = 0.20. The company's revenues, in thousands of dollars, are estimated in the accompanying pay-off table:
Decision | S1 | S2 | S3 |
Neither | $0 | $0 | $0 |
Product 1 only | $125 | $65 | $30 |
Product 2 only | $105 | $60 | $30 |
Both | $220 | $110 | $40 |
a) Compute the expected monetary value for each decision. (Round the final answers to 2 decimal places.)(4 marks)
b) What decision would you recommend? (1 mark)
c)Develop an opportunity loss table. (Round the final answers to the nearest whole number.) (4 marks)
d) Compute the expected opportunity loss for each decision. (Round the final answers to 2 decimal places.) (4 marks)
e) Compute the expected value of perfect information. (Round the final answers to the nearest whole number.) (3 marks)
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