Super Cola Is Also Considering the Introduction of a Root

question 27

Essay

Super Cola is also considering the introduction of a root beer drink.The company thinks the probability that the product will be a success is 0.6.The payoff table is as follows: ​
The company has a choice of two research firms to obtain information for this product.Stanton Marketing has market indicators I₁ and I₂ for which P(I₁ | s₁)= 0.7 and P(I₁ | s₂)= 0.4.New World Marketing has indicators J₁ and J₂ for which P(J₁ | s₁)= 0.6 and P(J₁ | s₂)= 0.3.
a.​
What is the optimal decision if neither firm is used? Over what probability of success range is this decision optimal?
b.What is the EVPI?
c.Find the EVSIs and efficiencies for Stanton and New World.
d.If both firms charge $5,000,which firm should be hired?
e.​
If Stanton charges $10,000 and New World charges $4000,which firm should Super Cola hire?

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Definitions:

Future

In finance, a future is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, often used as a financial instrument for hedging or speculation.

Swap Contract

A swap contract is an agreement between two parties to exchange financial instruments or cash flows at a future date based on specified terms.

Specified Cash Flows

Specified Cash Flows refers to particular amounts of money that are expected to be received or paid out at defined times during the life of a financial instrument or investment.

Exchange

Exchange signifies a platform or system where various entities trade commodities, securities, currency, and other instruments.