Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Honey is a technology company that provides online coupons to its subscribers. Honey's analytics staff has developed a classification method to predict whether a customer

Honey is a technology company that provides online coupons to its subscribers. Honey's analytics staff has developed a classification method to predict whether a customer who has been sent a coupon will apply the coupon toward a purchase. For a sample of customers, the following table lists the classification model's estimated coupon usage probability for a customer. For this particular campaign, suppose that when a customer uses a coupon, Honey receives $1 in revenue from the product sponsor. To target the customer with the coupon offer, Honey incurs a cost of $0.05. Honey will offer a customer a coupon as long as the expected profit of doing so is positive. Using the equation
Expected Profit of Coupon Offer=P(coupon used)\times Profit if coupon used+(1-P(coupon used))\times Profit if coupon not used
determine which customers should be sent the coupon.
Customer Probability of Using Coupon
10.50
20.37
30.25
40.11
50.08
Determine the expected profit for each customer. Round your answers to the nearest cent. Enter negative value as negative number, if any.
Customer Expected Profit
1 $
2 $
3 $
4 $
5 $
The expected profit is positive for customers (2 and 3)(4 and 5))1,2, and 3)(3,4, and 5)(1,2,3, and 4)(1,2,3, and 5)(2,3,4, and 5)(1,2,3,4, and 5), so these customers ( should be offered/ should not be offered) the coupon

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Handbook Of Pairs Trading

Authors: Douglas S. Ehrman

1st Edition

0471727075, 9780471727071

More Books

Students also viewed these Finance questions