The ABC Co

Essay

The ABC Co.is considering a new consumer product.They have no idea whether or not the XYZ Co.will come out with a competitive product.If ABC adds an assembly line for the product and XYZ does not follow with a competitive product, their expected profit is $40,000; if they add an assembly line and XYZ does follow, they still expect a $10,000 profit.If ABC adds a new plant addition and XYZ does not produce a competitive product, they expect a profit of $600,000; if XYZ does compete for this market, ABC expects a loss of $100,000.
Calculate Hurwicz's criterion of realism using αs of a.0.7, b.0.3, and c.0.1.