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Our Price High Medium Low Competitor's Price High PhP400,000 PhP475,000 PhP350,000 Medium PhP250,000 PhP325,000 PhP250,000 Low PhP25,000 PhP 175,000 PhP 125,000

Our Price High Medium Low Competitor's Price High PhP400,000 PhP475,000 PhP350,000 Medium PhP250,000 PhP325,000 PhP250,000 Low PhP25,000 PhP 175,000 PhP 125,000

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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2. You have been hired by the No Flight Golf Company and your first task is to decide whether to market a new golf ball utilizing breakthrough technology and if so, determine the price. The payoff of your decision will be affected by whether your competitor will market similar balls and the price of their golf balls after you go to market. The cost to market the golf balls is PhP80,000. The table below describes the payoffs of each pricing combination, assuming No Flight will have competition. Our Price High Medium Low Competitor's Price High PhP400,000 PhP475,000 PhP350,000 Medium PhP250,000 PhP325,000 PhP 175,000 PhP250,000 PhP 125,000 Low PhP25,000 a. What should be the pessimism value the company should consider if it is indifferent between pricing the product high and low? b. What pricing strategy should the company follow if it uses the minimax regret criterion? c. What pricing strategy should the company follow if it uses the equally likely criterion? d. What pricing strategy should the company follow if it uses the maximin criterion? e. What pricing strategy should the company follow if it uses the maximax criterion?
Transcribed Image Text:2. You have been hired by the No Flight Golf Company and your first task is to decide whether to market a new golf ball utilizing breakthrough technology and if so, determine the price. The payoff of your decision will be affected by whether your competitor will market similar balls and the price of their golf balls after you go to market. The cost to market the golf balls is PhP80,000. The table below describes the payoffs of each pricing combination, assuming No Flight will have competition. Our Price High Medium Low Competitor's Price High PhP400,000 PhP475,000 PhP350,000 Medium PhP250,000 PhP325,000 PhP 175,000 PhP250,000 PhP 125,000 Low PhP25,000 a. What should be the pessimism value the company should consider if it is indifferent between pricing the product high and low? b. What pricing strategy should the company follow if it uses the minimax regret criterion? c. What pricing strategy should the company follow if it uses the equally likely criterion? d. What pricing strategy should the company follow if it uses the maximin criterion? e. What pricing strategy should the company follow if it uses the maximax criterion?
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