Determine a course of action for the manager

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Reference no: EM132168442

Using a Decision Tree

Harvey Jones, a manager for US Sales, Inc has to decide whether to promote a product or abandon it.

If the product is abandoned, Harvey will be able to sell the remaining inventory for a payoff of $200.

If the product is promoted, dealer acceptance can be either quick or slow. In either case Harvey then has to decide whether to continue with the product or stop production. If the manager continues with the product the resulting sales can be low, medium, or high.

The probability of quick acceptance by dealers is expected to be 0.6, of slow acceptance 0.4.

If the manager decides to continue with the product after quick acceptance, the probabilities and payoffs are as follows:

low sales 0.2, $100; medium sales 0.3, $400; high sales 0.5, $500

If the manager decides to continue with the product after slow acceptance, the probabilities and payoffs are as follows:

low sales 0.1, $50; medium sales 0.6, $100; high sales 0.3, $400

If production is stopped after the promotion, the payoff will be $200.

Determine a course of action for the manager, using a decision tree and the expected value criterion.

Reference no: EM132168442

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