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Katutura Enterprises must choose between two alternatives. Alternative 1 is to produce an inferior product that is suited to lower demand, alternative 2 is
Katutura Enterprises must choose between two alternatives. Alternative 1 is to produce an inferior product that is suited to lower demand, alternative 2 is to produce a superior product that is suited to higher demand. Assuming demand is either lower or higher and not in between, and that the probability of each outcome is 50%, the revenues from each alternative are predicted to be: Lower demand Higher demand Expected value N$ N$ N$ Alternative 1 200 000 320 000 260 000 Alternative 2 20 000 400 000 210 000 Which alternative should be followed using the regret criterion?
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