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A local brewing company is trying to decide which type of dark beer to brew for the Fall. Due to competition in the dark
A local brewing company is trying to decide which type of dark beer to brew for the Fall. Due to competition in the dark brew market, they stand to make $40,000 if they make porter and the market demand for dark beer is strong, However, if the market demand is weak, they will only make $10,000. If they brew stout instead, they estimate a payoff of $70,000 if the market is strong and a loss of $10,000 if the market for dark beer is weak. The company president has stated that they can not plan to brew any dark beer this fall unless they can expect to make at least $30,000 on it. Given this constraint and using the Expected Value Approach, what decision would the brewing company make? Strong (s1) $40,000 0.65 Porter Weak (s2) $10,000 0.35 Strong (s1) $70,000 0.65 Stout Weak (s2) 0.35 -$10,000 Brew both Brew neither Brew Stout Brew Porter
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