5. The cost-of-living increases brought about by the pandemic, including increased energy costs, has forced Emma Wang, the managing director of PinkiePie plc, to identify new marketing strategies she might employ over the coming year in order to maximise PinkiePies sales. She decides that there are three possible strategies, A, B and C, and that the sales (m) which these strategies will produce will depend upon the rate of inflation in the coming year as follows:

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MANG6134W1 Profit achieved by PinkiePie plc (m)

		Rate of inflation
		High	Medium	Low
PinkiePies business strategy	A	4	7	11
	B	5	8	10
	C	2	6	15

1. (a) If Emma Wang employs the coefficient of optimism criterion to select an optimal strategy, determine how optimistic she would need to be in order to choose strategy C and explain the methodology employed.

   (200 words maximum) (15 marks)

1. (b) Determine which strategy Emma Wang would employ if she used the regret criterion and explain the methodology employed?

   (150 words maximum) (15 marks)

2. (c) Outline the relative strengths and weaknesses of the maximax and the insufficient reason criteria.

   (200 words maximum) (20 marks)

3. (d) Pinkie Pies economist informs Emma Wang that inflation will be either high or low in the coming year (i.e., he believes that inflation will not be medium). Following discussions, they agree that the probability of inflation being high is 0.8 and low is 0.2.

   In the light of this additional information determine which strategy Emma Wang would select if she employed the EMV, Variance, and Risk-adjusted statistic techniques. You are also expected to discuss the relative merits of these approaches and the value of sensitivity analysis when employing these techniques.