The ABC Co

question 9

Essay

The ABC Co.is considering a new consumer product.They believe there is a probability of 0.4 that 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.
(a)Determine the EMV of each decision.
(b)Determine the EOL of each decision.
(c)Compare the results of (a)and (b).
(d)Calculate the EVPI.

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Definitions:

Behaviorism

A theory in psychology that focuses on observable behaviors and dismisses mental states as irrelevant.

Behavior Approach

A theory in psychology focusing on observable behaviors rather than on the internal mental state, emphasizing the learning processes that lead to changes in behavior.

Rewards

Positive reinforcements or incentives used to encourage specific behaviors or responses, often serving as motivators in learning and behavior modification.

Caution

The practice of avoiding potential dangers or mistakes by taking careful measures or considering possible consequences.