Strategy that maximizestechwares expected net revenue

Reference no: EM13338022

Techware Incorporated is considering the introduction of two newsoftware products to the market. In particular, the company hasfour options regarding these two proposed products: introduceneither product, introduce product 1 only, introduce product 2only, or introduce both products. Research and development costsfor products 1 and 2 are $180,000 and $150,000, respectively. Notethat the first option entails no costs because research anddevelopment efforts have not yet begun. The success of thesesoftware products depends on the trend of the national economy inthe coming year and on the consumers’ reaction to theseproducts. The probabilities of observing a strong, fair, and weaktrend in the national economy in the coming year are 0.30, 0.50,and 0.20, respectively.

a. Formulate a payoff table that specifies Techware’s netrevenue (in dollars) for each possible decision and each outcomewith respect to the trend in the national economy.

b. Use PrecisionTree to identify the strategy that maximizesTechware’s expected net revenue from the given marketing opportunities.

Reference no: EM13338022

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