In the Dermavescent case assume the following payoff table (WS#4). (note that it
ID: 2719774 • Letter: I
Question
In the Dermavescent case assume the following payoff table (WS#4). (note that it differs from that given in class)
Payoff Table
Low Estimate* High Estimate*
P = .3 P = .7
Aerosol Container
5 ½ Ounce Package $45,000 $95,000
10- Ounce Package -$30,000 $155,000
*Represents the economic condition at the time of the product introduction
Calculate
i) EMV 5 ½ oz package = $
ii) EMV 10 oz package = $
iii) EMVPI = $
In each case show your working.
Assume that you are “risk averse.” Use the data above to address each of the circumstances below:
i) if you had to make a decision, which package size would you introduce to the market?
ii) if you had to make a decision (i.e., a decision to be made many times in sequence), which package size would you choose?
In each of the above situations carefully explain and defend your logic.
Now assume that you are a “risk taker.” Use the data above to address each of the circumstances below:
i) if you had to make a decision, which package size would you introduce to the market?
ii) if you had to make a decision (i.e., a decision to be made many times in sequence), which package size would you choose?
In each of and above, carefully explain and defend your logic.
Explanation / Answer
In the Dermavescent case assume the following payoff table (WS#4). (note that it