The J. Whack Co. is considering a new product. The senior management has no idea

Question

The J. Whack Co. is considering a new product. The senior management has no idea whether or not the Nita Jackson Co. will come out with a competitive product. If J. Whack adds an assembly line for the product and Nita Jackson does not follow with a competitive product, their expected profit is $40,000; if they add an assembly line and Nita Jackson does follow, they still expect a $10,000 profit. If J. Whack adds a new plant addition and Nita Jackson does not produce a competitive product, they expect a profit of $600,000; if Nita Jackson does compete for this market, J. Whack expects a loss of $100,000.

Part 1: Construct a Pay off table for this situation;

Part 2: Calculate Hurwicz's criterion of realism using 's of a. 0.7, b. 0.3, and c. 0.1.

Explanation / Answer

1. Pay off tables

We know that pay off table means that list of payoff of each decision. The positive value suggests that gain of payoff and negative value shows that the loss of payoff.

2. hurwicz's critiron is expressed in a tables.

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