• The ABC Co. is considering a new consumer product. They have no idea whether or not the XYZ Co. will come out with a competitive product. If ABC adds an assembly line for the product and XYZ does not follow with a competitive product, their expected profit is $40,000; if they add an assembly line and XYZ does follow, they still expect a $10,000 profit. If ABC adds a new plant addition and XYZ does not produce a competitive product, they expect a profit of $600,000; if XYZ does compete for this market, ABC expects a loss of $100,000.

Calculate Hurwicz's criterion of realism using 's of a. 0.7, b. 0.3, and c. 0.1.