1. Show the two-period tree diagram for a customer who last purchased Red Pop. What is the probability that this customer purchases Red Pop on the second purchase? 2. What is the long-run market share for each of these two products? 3. A Red Pop advertising campaign is being planned to increase the probability of attracting Super Cola customers. Management believes that the new campaign will increase to 0.15 the probability of a customer switching from Super Cola to Red Pop. What is the projected effect of the advertising campaign on the market shares?

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
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Chapter1: Starting With Matlab
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Management of the New-Fangled Soft drink Company believes that the probability of a customer purchasing Red Pop or the company’s major competition, Super Cola, is based on the customer’s most recent purchase. Suppose that the following transition probabilities are appropriate:

 

                                                                  To

From                        Red Pop                                Super Cola

Red Pop                     0.9                                             0.1

Super Cola                 0.1                                             0.9

1. Show the two-period tree diagram for a customer who last purchased Red Pop. What

is the probability that this customer purchases Red Pop on the second purchase?

2. What is the long-run market share for each of these two products?

3. A Red Pop advertising campaign is being planned to increase the probability of attracting Super Cola customers. Management believes that the new campaign will increase to 0.15 the probability of a customer switching from Super Cola to Red Pop. What is the projected effect of the advertising campaign on the market shares?

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