The table shows both prospective profits and losses for a company, depending on what decision is made and what state of nature occurs. Use the information to determine what the company should do.
a.
if an optimistic strategy is used.
b.
if a conservative strategy is used.
c.
if minimax regret is the strategy.
Definitions:
Substitutes
Goods or services that can be used in place of each other, where an increase in the price of one leads to an increase in demand for the other.
Price Inelastic Demand
A situation where the quantity demanded of a good does not change significantly in response to changes in its price.
Luxury
Goods or services that are considered superior in quality and high in price, often seen as status symbols and not essential for basic needs.
Price Elastic
A measure of how the quantity demanded of a good responds to a change in its price.
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