Visual Park Is Considering Marketing One of Its Two Television

question 44

Essay

Visual Park is considering marketing one of its two television models for coming Christmas season: Model A or Model B. Model A is a unique featured television and appears to have no competition. Estimated profits (in thousand dollars) under high, medium, and low demand are given below: $$\begin{array} { | l | c | c | c | } \hline & & { \text { Demand } } \\\hline \text { Model A } & \text { High } & \text { Medium } & \text { Low } \\\hline \text { Profit } & 1200 & 900 & 500 \\\hline \text { Probability } & 0.2 & 0.6 & 0.2 \\\hline\end{array}$$ Visual Park is optimistic about the TV Model B. However, the concern is that profitability will be affected if a competitor launches a TV model which has similar features as Model B. Estimated profits (in thousand dollars) with and without competition is as follows: $$\begin{array} { | l | c | c | c | } \hline \text { Model B } & & { \text { Demand } } \\\hline \text { With competition } & \text { High } & \text { Medium } & \text { L ow } \\\hline \text { Profit } & 1200 & 900 & 500 \\\hline \text { Probability } & 0.2 & 0.3 & 0.5 \\\hline\end{array}$$ $$\begin{array} { | l | c | c | c | } \hline \text { Model B } & & { \text { Demand } } \\\hline \text { Without competition } & \text { High } & \text { Medium } & \text { Low } \\\hline \text { Profit } & 1600 & 1100 & 700 \\\hline \text { Probability } & 0.6 & 0.2 & 0.2 \\\hline\end{array}$$
a. Develop a decision tree for the Visual Park problem.
b. For planning purposes, Visual Park believes there is a 0.7 probability that its competitor will launch a TV model similar to Model B. Given this probability of competition, the director of planning recommends marketing the Model A. Using expected value, what is your recommended decision?
c. Show a risk profile for your recommended decision.
d. Use sensitivity analysis to determine the probability of competition for Model B would have to be for you to change your recommended decision alternative.

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Definitions:

Shock Absorber

A mechanical device designed to smooth out or dampen shock impulse, and absorb kinetic energy.

Dizygotic Twins

Twins that arise from the separate fertilization of two eggs; commonly known as fraternal twins. Compare with monozygotic twins.

Fraternal Twins

Twins that develop from two different eggs fertilized by two different sperm, resulting in siblings that are genetically distinct.

Extraembryonic Membrane

Membranes forming outside the embryo that support its development, including the yolk sac, amnion, chorion, and allantois in vertebrates.