Chapter6Q08answer

Chapter6Q08answer - Chapter 6 Question 8 a) 0.3 Market...

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Chapter 6 a) 0.3 Market share % 5 Change ingredients 5 22.5 0.7 0.4 30 Tepsi include it 1 0.8 10 Do not change Do not include device 12 0.2 24 20 0.6 Tespi don’t include it 25 15 2 31.9 45 2 Include device 40 48 50 Roka Rola should include the device in their cans, but not change the ingredients if Tepsi include the device in their cans.
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b) 0 5 10 15 20 25 30 35 0 0.2 0.4 0.6 0.8 1 p (Tespi include device when Roka Rola reject offer) Expected market share % Do not include device Include device The graph shows that the decision is totally insensitive to the doubtful probability. This is because the maximum expected market share that can be achieved if Roka Rola do not incorporate the device is 25%, while the expected market share if the device is included is 31.9%. c) i) The utility function is shown below. The utilities that were omitted are shown in red. Market share % Utility 50 10 0.25 15 0.45 20 0.6 25 0.72 30 0.8 40 0.95 45 0.98 50 1 The graph of the utility function is shown on the next page.
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0 0.2 0.4 0.6 0.8 1 0 1 02 03 04 05 0 Market share (%) Utility This indicates that, in relation to market share, the marketing manager is risk averse. To see this
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Chapter6Q08answer - Chapter 6 Question 8 a) 0.3 Market...

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