Suppose That Coke and Pepsi Are Fighting for the Cola

question 14

Essay

Suppose that Coke and Pepsi are fighting for the cola market.Each week each person in the market buys one case of Coke or Pepsi.If the person's last purchase was Coke,there is a 0.80 probability that this person's next purchase will be Coke; otherwise,it will be Pepsi.(We are considering only two brands in the market.)Similarly,if the person's last purchase was Pepsi,there is a 0.90 probability that this person's next purchase will be Pepsi; otherwise,it will be Coke.Currently half of all people purchase Coke,and the other half purchase Pepsi.Simulate one year of sales in the cola market and estimate each company's average weekly market share.Do this by assuming that the total market size is fixed at 100 customers.(Hint: Use the RISKBINOMIAL function.)

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Definitions:

Independent

A term describing events that are not affected by other events, or variables with no association or influence on each other.

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment using a specified discount rate.

Cash Inflows

Funds entering a business or project, typically received through sales, investments, or financing.

Cash Outflows

Money spent or costs incurred by a business or individual, resulting in a decrease in cash assets.