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?
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