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5. Determining Which Video Game to Market. The computer-gaming market in the United States is estimated at $18.5 billion as of 2017 (VentureBeat website). Consider
5. Determining Which Video Game to Market. The computer-gaming market in the United States is estimated at $18.5 billion as of 2017 (VentureBeat website). Consider the case of Video Tech, a computer-gaming company located in San Jose, California. It is considering the production of one of two new video games for the coming holiday season: Battle Pacific or Space Pirates. Battle Pacific is a unique game and appears to have no competition. Estimated profits (in thousands of dollars) under high, medium, and low demand are as follows: Demand Battle Pacific High Medium Low Profit $1,000 $700 $300 Probability .2 .5 .3 Video Tech is optimistic about its Space Pirates game. However, the there is concern that profitability will be affected by a competitor's introduction of a video game viewed as similar to Space Pirates. Estimated profits (in thousands of dollars) with and without competition are as follows: Space Pirates Demand With Competition High Medium Low Profit $800 $400 $200 Probability .3 .4 .3 Space Pirates Demand Without Competition High Medium Low Profit $1,600 $800 $400 Probability .5 .3 .2 a. Develop a decision tree for the Video Tech problem. b. For planning purposes, Video Tech believes there is a .6 probability that its com- petitor will produce a new game similar to Space Pirates. Given this probability of competition, the director of planning recommends marketing the Battle Pacific video game. Using expected value, what is your recommended decision
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