Market Condition
Three Different Designs Are Being Considered for a New

question 75

Short Answer

Market Condition
Three different designs are being considered for a new refrigerator,and profits will depend on the combination of the refrigerator design and market condition.The following payoff table summarizes the decision situation,with amounts in millions of dollars. $$\begin{array}{l}\text { Market Condition }\\\begin{array} { | c | c | c | c | } \hline \text { Design } & \text { I } & \text { II } & \text { III } \\\hline \mathrm { A } & 27 & 16 & 8 \\\mathrm {~B} & 17 & 18 & 20 \\\mathrm { C } & 7 & 12 & 42 \\\hline\end{array}\end{array}$$
-Assume that the probabilities for the three market conditions are estimated as 0.1,0.6,and 0.3,respectively.Which design should be selected in order to maximize the firm's expected profit?

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Definitions:

UCC Section 3-311

A provision in the Uniform Commercial Code that addresses the accord and satisfaction by use of a negotiable instrument.

Paid-in-Full Check

A paid-in-full check is a check by which the issuer intends to settle a debt completely, often accompanied by a statement indicating that the payment is meant to resolve the obligation in full.

Different Performance

Fulfillment of contractual obligations in a manner that is different from what was specifically agreed upon, sometimes acceptable with mutual consent.

Original Duty

The fundamental obligation or responsibility that a party has in a contractual or legal relationship.