Calculate the expected value for four decision options

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The following table lists the anticipated profits associated with four alternate product innovations using two possible scenarios: low demand (35% probability) and high demand (65% probability.)

Product InnovationABCDProfits with Low Demand (p = .35)55
102045Profits with High Demand (p = .65)40601035

a. Calculate the expected value for each of the four decision options (A, B, C and D). Based on the expected value criterion, which product innovation (decision option) should be selected?

b. If the probabilities of each demand situation were not known in this case, which option should be selected if the decision maker applies the maximin decision criterion?

Reference no: EM132701517

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