The Super Cola Company must decide whether or not to introduce a new diet soft drink. Management feels that if it does introduce the diet sode it will yield a profit of $1.25 million if sales are 100 million, a profit of $300,000 if sales are 50 million, or it will lose $1.75 million if sales are only 1 million bottles. If Super Cola does not market the new diet soda, it will suffer a loss of $400,000.

a. Construct a payoff table for this problem.

b. Construct a regret (opportunity loss) table for this problem.

c. An internal marketing research study has found P (100 million in sales) = 1/2; P (50 million in sales) = 1/3; P (1 million in sales) = 1/6. Should Super Cola introduce the new diet soda based on expected payoff (profits) ?

d. Based on expected opportunity losses, which strategy is best for Super Cola?

e. What is the EVPI (expected value of perfect information)?

f. A consulting firm can perform a more thorough study for $350,000. Should management have this study performed?

g. If the conditional probabilities are .75, .15, and .10 for the three states, what would be the expected value of sample information. (EVSI)?