Question
Luna, a former class mate of Kianas, has developed a new product called the Cat Castle. Luna came to Kiana for advice on how she
Luna, a former class mate of Kianas, has developed a new product called the Cat Castle. Luna came to Kiana for advice on how she should evaluate her options. Kiana suggested they develop a payoff table and then use it to evaluate her options. First, they had to determine the Decision Alternatives, States of nature and payoffs. Luna was trying to decide between: (1) Sell the product to another company and move to the beach, (2) Hire SBPR to market and distribute the product, (3) Market the product herself and sell on Amazon. Selling the product directly, she can sell it for $50,000. If she chooses to hire SBPR to market and distribute the product, her payoff will depend on the economic environment (or states of nature). If the economy is good, then the estimated payoff to Luna is $80,000. Moderate economy is estimated to have a payoff of 60,000. Bad economy is estimated to have a payoff of $35,000 and if there is Financial Crisis, it would return nothing to Luna. If she chooses to market the product herself and sell on Amazon, her payoffs are as follows: If there is good economy, she estimates a payoff to be $100,000. Moderate economy is estimated to have a payoff of $70,000. Bad economy is estimated to have a payoff of $40,000 and Financial Crisis would cost Luna $15,000. Questions: 1) What are the decision alternatives? What are the States of Nature? What are the payoffs? Build the payoff table on Excel and label these items. Please answer it in timely manner and thanks
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