Toys Everyday must decide which course of action to follow in promoting a new Gizmo toy it has developed. Initially management must decide whether to market this toy or to conduct a test marketing programme. After test marketing the Gizmo, management must decide whether to abandon it or distribute it nationally. A national success will (NS) will increase profits by $1,000,000 and a failure (NF) will reduce profits by $200,000. Abandoning the product will not affect profits. The test marketing will cost the company a further $20,000. After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help Toys make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs It also includes the revised probabilities b) Fold back the decision tree to determine the best strategy for Toys; you must state this strategy. What is the final expected profit? c) What is the expected value of sample information(EVSI)- the most that should be paid to the marketing firm for the test? d) Calculate the expected value of perfect information (EVPI)- the most that should be paid to an expert for perfect prediction of the uncertain outcomes. e) What is the efficiency of sample information?
Toys Everyday must decide which course of action to follow in promoting a new Gizmo toy it has developed. Initially management must decide whether to market this toy or to conduct a test marketing programme. After test marketing the Gizmo, management must decide
whether to abandon it or distribute it nationally.
A national success will (NS) will increase profits by $1,000,000 and a failure (NF) will reduce profits by $200,000. Abandoning the product will not affect profits. The test marketing will cost the company a further $20,000.
After you have computed the revised probabilities round to two decimal places
a) Construct the appropriate decision tree to help Toys make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs
It also includes the revised probabilities
b) Fold back the decision tree to determine the best strategy for Toys; you must state this strategy. What is the final expected profit?
c) What is the
d) Calculate the expected value of perfect information (EVPI)- the most that should be paid to an expert for perfect prediction of the uncertain outcomes.
e) What is the efficiency of sample information?
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