Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows:
Success (s₁)Failure (s₂)
Produce $250,000 -$300,000
Do Not Produce -$50,000 -$20,000
Company management has determined the following utility values:

a.Is the company a risk taker,risk averse,or risk neutral?
b.What is Super Cola's optimal decision?

Question

Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows:
Success (s₁)Failure (s₂)
Produce $250,000 -$300,000
Do Not Produce -$50,000 -$20,000
Company management has determined the following utility values:

a.Is the company a risk taker,risk averse,or risk neutral?
b.What is Super Cola's optimal decision?

Quizplus · Accepted Answer

The Answer of Super Cola is considering the introduction of a new 8 oz.root beer.The probability that the root beer will be a success is believed to equal .6.The payoff table is as follows: Success (s₁)Failure (s₂) Produce $250,000 -$300,000 Do Not Produce -$50,000 -$20,000 Company management has determined the following utility values: a.Is the company a risk taker,risk averse,or risk neutral? b.What is Super Cola's optimal decision?

Super Cola Is Considering the Introduction of a New 8