A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year. If the expanded advertising campaign is successful, the company expects sales to increase by $1.6 million next year. If the advertising campaign fails, the company expects sales to increase by only $400,000 next year. If the advertising budget is not increased, the company expects sales to increase by $200,000. Identify the states of nature in this decision-making problem.

Question

Quizplus · Accepted Answer

The states of nature in this decision-making problem are the two possibilities: (1) the campaign is successful and (2) the campaign is not successful. These are the uncertain future events that will affect the outcome of the decision.

A Company That Manufactures Designer Jeans Is Contemplating Whether to Increase