The megabuck computer company is thinking of introducing two new products, The first model, model 101, is a small computer designed specifically for children between ages 8 and 16. The second model , model 202, is a medium sized computer suitable for managers. Because of limited production capacity, Megabuck has decided to produce only one of the products.

The profitability of each model depends on the proportion of the potential market that would actually buy the computer. For Model 101, the size of the market is estimated at 10 million, whereas for model 202, it is estimated at 3million.

After careful analysis , the management of megabuck has concluded that the percentage of buyers of model 101 is 5 %, 10%, or 15%.

Model 101 5% = 20 million in profits, 10% = 100 million , 15% = 210 million in profits.

An expert in probability from the university estimated the probability of the percentage as P(5%)=.2, P(10%)= .4, and P(15%)=.4

A similar model analysis for model 202 30% = 70 million, 40% = 100 million, and 50%= 150 Million

For the model the probability is P(30%)=.1, P(40%)=.4, and P(50%)-.5

A. Based on this information, and with the objective of maximizing expected profit, which model should they produce?

B. To make a better decision, Megabuck sampled 10 potential buyers of model 101 and 20 for 202. Only 1 of 10 wished to purchase model 101 , whereas 9 with 202, with this information revise the prior probabi;lities and determine which model should be produced