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: If she uses the Laplace criterion, which advertising strategy will she use?
A) print
B) mixed
C) television
D) either print or mixed
E) either mixed or television

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:  If she uses the Laplace criterion, which advertising strategy will she use?
A) print 
B) mixed 
C) television 
D) either print or mixed 
E) either mixed or television

Quizplus · Accepted Answer

According to the Laplace criterion, the decision should be based on the highest expected value. By calculating the expected value for each option, we can determine the best choice:

Print: (0.3*$3)+(0.5*$4)+(0.2*$5) = $3.8

Television: (0.2*$3)+(0.6*$4)+(0.2*$5) = $4.0

Mixed: (0.25*$3)+(0.65*$4)+(0.1*$5) = $4.0

The television option has the highest expected value, so the advertising manager should choose television advertising.

The Advertising Manager for Roadside Restaurants, Inc