Super Cola Is Considering the Introduction of a New 8

question 40

Essay

Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows:
Company management has determined the following utility values:
$$\begin{array} { l | l l } & \text { Success } \left( s _ { 1 } \right) & \text { Failure } \left( s _ { 2 } \right) \\\hline \text { Produce } & \$ 250,000 & - \$ 300,000 \\\text { Do Not Produce } & - \$ 50,000 & - \$ 20,000\end{array}$$ $$\begin{array} { l c c c c } \text { Amount } & \$ 250,000 & - \$ 20,000 & - \$ 50,000 & - \$ 300,000 \\\hline \text { Utility } & 100 & 60 & 55 & 0\end{array}$$
a.Is the company a risk taker,risk averse,or risk neutral?
b.What is Super Cola's optimal decision?

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Definitions:

Persuasion

The process of motivating someone to do or believe something through reasoning or argumentation.

Importance

The quality or state of being of great significance or value; often determined by its impact or influence on events or decisions.

Altruism

The selfless concern for the well-being of others without expectation of reward or recognition.

Helping Others

The act of providing assistance, support, or kindness to other individuals without expecting anything in return.