Super Cola Is Considering the Introduction of a New 8

question 24

Essay

Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows: $$\begin{array} { l | l c } & \text { Success } \left( s _ { 1 } \right) & \text { Failure } \left( s _ { 2 } \right) \\\hline \text { Produce } & \$ 250,000 & - \$ 300,000 \\\text { Do Not Produce } & - \$ 50,000 & - \$ 20,000\end{array}$$ Company management has determined the following utility values: $$\begin{array} { l c c c c } \text { Amount } & \$ 250,000 & - \$ 20,000 & - \$ 50,000 & - \$ 300,000 \\\hline \text { Utility } & 100 & 60 & 55 & 0\end{array}$$
a.Is the company a risk taker, risk averse, or risk neutral?
b.What is Super Cola's optimal decision?

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Definitions:

Rogers

A reference to Carl Rogers, an influential figure in psychology known for his person-centered approach to therapy and development of humanistic psychology.

Physiological

Related to the functions and processes within living organisms and their parts.

Belongingness

The human emotional need to be an accepted member of a group, whether it is family, friends, colleagues, or within a community.

Esteem

The respect, admiration, and confidence an individual has in themselves; a fundamental human need for feeling valued and validated.