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Adelaide Airlines decided to offer direct services from Tasmania to Darwin. The CEO needs to decide between a full-price or a discounted price service to
Adelaide Airlines decided to offer direct services from Tasmania to Darwin. The CEO needs to decide between a full-price or a discounted price service to be offered by the airlines. The table below shows the profit (in $ thousand) for each type of service and demand. Service Strong Demand Weak Demand Full price $960 -$390 Discount $670 $320 a) What is the recommended decision using the optimistic and conservative? (2 + 2 = 4 marks) b) If the probability of strong demand is 0.7 and the probability of weak demand is 0.3, what is the optimal decision? (4 marks)
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