Visual Park Is Considering Marketing One of Its Two Television

Essay

Visual Park is considering marketing one of its two television models for coming Christmas season: Model A or Model B. Model A is a unique featured television and appears to have no competition. Estimated profits (in thousand dollars) under high, medium, and low demand are given below: $$\begin{array} { | l | c | c | c | } \hline & & { \text { Demand } } \\\hline \text { Model A } & \text { High } & \text { Medium } & \text { Low } \\\hline \text { Profit } & 1200 & 900 & 500 \\\hline \text { Probability } & 0.2 & 0.6 & 0.2 \\\hline\end{array}$$ Visual Park is optimistic about the TV Model B. However, the concern is that profitability will be affected if a competitor launches a TV model which has similar features as Model B. Estimated profits (in thousand dollars) with and without competition is as follows: $$\begin{array} { | l | c | c | c | } \hline \text { Model B } & & { \text { Demand } } \\\hline \text { With competition } & \text { High } & \text { Medium } & \text { L ow } \\\hline \text { Profit } & 1200 & 900 & 500 \\\hline \text { Probability } & 0.2 & 0.3 & 0.5 \\\hline\end{array}$$ $$\begin{array} { | l | c | c | c | } \hline \text { Model B } & & { \text { Demand } } \\\hline \text { Without competition } & \text { High } & \text { Medium } & \text { Low } \\\hline \text { Profit } & 1600 & 1100 & 700 \\\hline \text { Probability } & 0.6 & 0.2 & 0.2 \\\hline\end{array}$$
a. Develop a decision tree for the Visual Park problem.
b. For planning purposes, Visual Park believes there is a 0.7 probability that its competitor will launch a TV model similar to Model B. Given this probability of competition, the director of planning recommends marketing the Model A. Using expected value, what is your recommended decision?
c. Show a risk profile for your recommended decision.
d. Use sensitivity analysis to determine the probability of competition for Model B would have to be for you to change your recommended decision alternative.