A. cash back when the consumer makes an online purchase;
B. cash back when the consumer makes a purchase at a clothing store; and
C. entry into a sweepstakes whenever the consumer makes a purchase;
If they choose option C (the sweepstakes entry), they will award a prize to 1 in 1,000 purchases. Based on the frequency that consumers make purchases with their other credit cards, the PiggyBank team estimates that consumers will make an average of 52 purchases a year with the new card.
PiggyBank has asked you about the probability of each option being preferred by card holders. They have also asked the probability of an individual consumer receiving a prize over the course of a year. Share your determination of probability in each of the situations. Explain how these two ways of assessing probability are different and how they can help make decisions.
This question was asked on May 24, 2010.
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