Market Efficiency - Theory Hearty Western Foods, one of the nation's largest consumer products firms, is trying to decide whether it should spend $5 million to test market a new ready -to-eat-product (called Kidwich), to proceed directly to a nationwide marketing effort, or to cancel the product. The expected payoffs (in millions of dollars) from cancellation versus nationwide marketing are given below: Prior experience with nationwide marketing efforts has been: If the firm decides to test market the product, the following information becomes available: For example, if the test market results predict a success, there is a 60% chance that the nationwide marketing effort really will be a success but a 30% chance it will be marginal and a 10% chance it will have no acceptance. a. If the firm is risk neutral, should it test market the product or not? b. If the firm is risk averse with a utility function U(W)=ln(W+11) should it test market the product or not