A Retailer Is Deciding How Many of a Certain Product

question 72

Multiple Choice

A retailer is deciding how many of a certain product to stock. The historical probability distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $8 per unit and sells for $25 per unit. The largest conditional value (profit) in the entire payoff table for this scenario is

• A) $-24 profit
• B) $-8 profit
• C) $17 profit
• D) $51 profit
• E) $75 profit

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Definitions:

Counterbalancing

A method of controlling for order effects in a repeated measures design by either including all orders of treatment presentation or randomly determining the order for each subject.

Order Effects

The impact that the sequence of presenting stimuli or conditions has on the responses of subjects in an experiment.

Latin Square

A technique to control for order effects without having all possible orders.

Counterbalanced

A method used in experiments to minimize the effects of order in the presentation of stimuli by varying the sequence among participants.