A firm is considering a product launch. It will do so if the expected total revenue is in excess of K1000. It decides to set the price at K10. Different levels of sales are predicted with probabilities of: 80 units with 0.15 probability; 100 units with 0.50 and 120 units with 0.35.

a). Should the firm go ahead and launch the product?

b). Outline and discuss the elements of a probabilistic decision model. List the main shortcomings of this approach to decision making.