The Super Cola Company Must Decide Whether or Not to Introduce

question 37

Essay

The Super Cola Company must decide whether or not to introduce a new diet soft drink. Management feels that if it does introduce the diet soda it will yield a profit of $1 million if sales are around 100 million, a profit of $200,000 if sales are around 50 million, or it will lose $2 million if sales are only around 1 million bottles. If Super Cola does not market the new diet soda, it will suffer a loss of $400,000.
a.
Construct a payoff table for this problem.
b.
Construct a regret table for this problem.
c.
Should Super Cola introduce the soda if the company: (1) is conservative; (2) is optimistic; (3) wants to minimize its maximum disappointment?
d.
An internal marketing research study has found P(100 million in sales) = 1/3; P(50 million in sales) = 1/2; P(1 million in sales) = 1/6. Should Super Cola introduce the new diet soda?
e.
A consulting firm can perform a more thorough study for $275,000. Should management have this study performed?

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Definitions:

Modern Medicine

The practice of medicine based on the application of scientific knowledge, technology, and interventions to prevent, diagnose, and treat diseases.

Hippocrates

An ancient Greek physician often referred to as the "Father of Medicine," known for his contributions to the understanding of disease and medical ethics.

Empirical Evidence

Information acquired by observation or experimentation that is used as the basis for testing hypotheses and building knowledge.

Contemporary Psychologists

Psychologists who are currently active or have contributed to the field in recent times, focusing on modern theories, practices, and research.