SOLVED PROBLEMS

Problem 10.1

A company is contemplating the introduction of a revolutionary new product with new packaging to replace the existing product at much higher price (S1) or a moderate change in the composition of the existing product with a new packaging at a small increase in price (S2) or a small change in the composition of existing except the world ‘new’ with a negligible increase in price (S3). The three possible states of nature of events are (i) high increase in sales (P1) (ii) no change in Sales (P2) and (iii) decrease in sales (P3). The marketing department of the company worked out the pay-offs in terms of yearly net profit for each of the strategies for these events (expected sales). This is represented in the following ...

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