Decision Analysis Problem

"MacMillan Toy Company has developed a collection of robot action figure toys that kids can transform into "prehistoric" insects with claws, fangs, and scorpion-like tails. MacMillan believes that its design is innovative enough that it can capture sales in this year's toy market before competitors can copy the major features and bring competing products to market. Nevertheless, MacMillan has some doubts about how appealing its design will be. Because the collection was hastily developed based on the recommendation of one of the new junior product developers, little market research has been done. So, the market could be very enthusiastic or it could be indifferent.

As MacMillan's Marketing Manager, we have some choices about how to bring this new toy collection to market. A conservative approach would be to introduce a single type of the toy and see how it fares. This option would keep the costs down in case the market response is unenthusiastic. A bold approach would be to bring out the entire collection. This option would be quite profitable if the market response is positive but unprofitable if the response is indifferent. Finally, there is a compromise option, which involves bringing out just two of the types of the toy.

Reviewing introductions of other action figures, our staff believes that it's possible to classify market responses to a new toy (toy collection) into three categories: Good, Fair, and Poor. Taking these one at a time, they have estimated the costs and revenues associated with each option, for each possible category of market response. Their economic analysis is summarizes in the following table of profit figures (given in thousands):

Market Response Good Fair Poor Single Type 100 60 10 Decisions T'wn Types 200 50 40 Entire Coliecon 300 40 400 The entries: in this table represent estimated prota for the next year for every combination of action and me_11