Super Cola Is Also Considering the Introduction of a Root

question 52

Essay

Super Cola is also considering the introduction of a root beer drink.The company feels that the probability that the product will be a success is .6.The payoff table is as follows:
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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)= .7 and P(I₁ | s₂)= .4.New World Marketing has indicators J₁ and J₂ for which P(J₁ | s₁)= .6 and P(J₁ | s₂)= .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 $4,000,which firm should Super Cola hire? Why?

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Definitions:

Tickets

Documents or electronic codes that grant the holder the right to admission to an event, transport service, or other specific activities.

Price Elasticity

Evaluates the responsiveness of product demand to variations in its market price.

Demand Function

A mathematical representation showing the quantity of a good or service consumers are willing and able to purchase at different prices.

Tickets

Official documents or electronic codes that grant the holder permission to enter an event, travel on a vehicle, or participate in a particular activity.