I am working on a case involving decision theory. Specifically, this is the Flanders of Springfield case. I have one last question to answer and I need some help.

**5. Now suppose that Flanders has not yet decided the sweater price. Again, assume that Flanders wishes to maximize expected contribution. What price should Flanders set for the sweaters? **

The sweaters are purchased at $35 and can be sold at $100 or $120. Quantities can be ordered in 600, 1,200 or 2,400. There is a .3 probability that the demand will be 600; .4 probability that the demand will be 1,200 and .3 probability that the market demand will be $2,400. What price should be set?

#### Top Answer

Given that the sweater are purchased at =$35 Sweater is selling at the rate of =$100 or $120 Quantities he ordered A=600 then... View the full answer