Question

A consumer electronics company is planning to introduce a new device. After careful consideration of costs, (e.g., there is a fixed cost of $5 million for developing the item), the projected state of the economy, etc., the marketing manager came up with the following payoff table (in $millions)

	Courses of action
Event	Market item	Do not market item
Introduction successful	$50	-$5
Introduction not successful	-$40	-$5

1. What are the decisions?
2. What are the states of nature?
3. What decision criterion would a conservative decision-maker make?
4. Use your answer in c. to determine what decision should be made in this case. Show all work to justify your answer.

Answer 1