The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows: $$\begin{array} { | l | l | l | l|}
\hline { \text { Strategy } } & { \text { Cable Network } } \
\hline & \text { Successful } & &\text { Failure } \
\hline \text { Print } & \$ 10 && 10 \
\hline \text { Mixed } & 4 & &14 \
\hline \text { Television } & 1 && 21 \
\hline
\end{array}$$ For what range of probability that the new cable network will be successful will she select the print media strategy?

Question

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows: $$\begin{array} { | l | l | l | l|} 
\hline   { \text { Strategy } } &  { \text { Cable Network } } \
\hline & \text { Successful } & &\text { Failure } \
 \hline \text { Print } & \$ 10 && 10 \
\hline \text { Mixed } & 4 & &14 \
\hline \text { Television } & 1 && 21 \
\hline
\end{array}$$ For what range of probability that the new cable network will be successful will she select the print media strategy?

Quizplus · Accepted Answer

The advertising manager should choose the print media strategy if the cost per thousand hits is either \$10 or \$10 if the cable network is successful or if it fails, respectively. The mixed strategy is cheaper only if the cable network is successful, and the television strategy is only cheaper if the cable network fails. Therefore, the manager should choose print media if the probability of success for the cable network is between 0 and 0.4, because in that range, the cost per thousand hits for print media is cheaper than the mixed strategy, and cheaper than or equal to the cost per thousand hits for the television strategy.

The Advertising Manager for Roadside Restaurants, Inc For What Range of Probability That the New Cable Network