Reference no: EM133535507

Case Study: Visual Park is considering marketing one of its two television models for coming Christmas season: Model A or Model B. Model A is a unique featured television and appears to have no competition. Estimated profits (in thousand dollars) under high, medium, and low demand are given below:

	Demand
Model A	High	Medium	Low
Profit	1200	900	500
Probability	0.2	0.6	0.2

Visual Park is optimistic about the TV Model B. However, the concern is that profitability will be affected if a competitor launches a TV model which has similar features as Model B. Estimated profits (in thousand dollars) with and without competition is as follows:

Model B	Demand
With competition	High	Medium	Low
Profit	1200	900	500
Probability	0.2	0.3	0.5

Model B	Demand
Without  competition	High	Medium	Low
Profit	1600	1100	700
Probability	0.6	0.2	0.2

 

Questions:

1. Develop a decision tree for the Visual Park problem.
2. For planning purposes, Visual Park believes there is a 0.7 probability that its competitor will launch a TV model similar to Model B. Given this probability of competition, the director of planning recommends marketing the Model A. Using expected value, what is your recommended decision?
3. Show a risk profile for your recommended decision.
4. Use sensitivity analysis to determine the probability of competition for Model B would have to be for you to change your recommended decision alternative.