Question
Foopon, a company that offers daily coupon deals, has the following business arrangement with a restaurant. A coupon for a $40 meal can be purchased
Foopon, a company that offers daily coupon deals, has the following business arrangement with a restaurant. A coupon for a $40 meal can be purchased by a consumer for $20 from Foopon, and the restaurant and Foopon split the $20 equally. Foopon sends an email message to a list of 100 potential consumers, who act independently, each of whom decides to buy a coupon with probability 0.1. The deal is on if at least 10 consumers decide to purchase a coupon. If only 9 or fewer consumers decide to purchase a coupon, then the deal is off and no coupons are sold.
Calculate the expected profit made by Foopon from this arrangement. (2 decimal places)
Hint: Here again, to avoid numerical precision issues, you may want to compute this expectation indirectly, by exploiting the fact that the expected value of a binomial with parameters n and p is equal to np.
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