Gamers Empire is considering marketing one of two new video games for the coming holiday season: Aliens Kidnapped My Dog or Ninjas vs. Pirates. Aliens Kidnapped My Dog does not appear to have any competition as it is a unique game. Estimated profits (in thousands of dollars) under high, medium and low demand are as follows: Demand Aliens Kidnapped My Dog High Medium Low Profit $1500 $1200 $800 Probability 0.2 0.5 0.3 Gamers Empire is optimistic about Ninjas vs. Pirates. However, the concern is that profitability will be affect by their competitor Samurai Games releasing a similar title called Samurai vs. Robots. Estimated profits (in thousands of dollars) with and without competition are as follows: Demand Ninjas vs. Pirates with competition High Medium Low Profit $1300 $900 $700 Probability 0.3 0.4 0.3 Ninjas vs. Pirates without competition Profit $2100 $1300 $900 Probability 0.5 0.3 0.2 a) Construct a decision tree in Excel b) Calculate the EMVs and state your decision if there is a 75% probability that Samurai vs. Robots will be released. c) If the probability that Samurai Games will release their game Samurai vs. Robots changes from 75% to 70% what is the new expected profits from Ninjas vs. Pirates?
Gamers Empire is considering marketing one of two new video games for the coming holiday season: Aliens Kidnapped My Dog or Ninjas vs. Pirates. Aliens Kidnapped My Dog does not appear to have any competition as it is a unique game. Estimated profits (in thousands of dollars) under high, medium and low demand are as follows:
|
|
Demand |
||
|
Aliens Kidnapped My Dog |
High |
Medium |
Low |
|
Profit |
$1500 |
$1200 |
$800 |
|
Probability |
0.2 |
0.5 |
0.3 |
Gamers Empire is optimistic about Ninjas vs. Pirates. However, the concern is that profitability will be affect by their competitor Samurai Games releasing a similar title called Samurai vs. Robots. Estimated profits (in thousands of dollars) with and without competition are as follows:
|
|
Demand |
||
|
Ninjas vs. Pirates with competition |
High |
Medium |
Low |
|
Profit |
$1300 |
$900 |
$700 |
|
Probability |
0.3 |
0.4 |
0.3 |
|
Ninjas vs. Pirates without competition |
|
|
|
|
Profit |
$2100 |
$1300 |
$900 |
|
Probability |
0.5 |
0.3 |
0.2 |
a) Construct a decision tree in Excel
b) Calculate the EMVs and state your decision if there is a 75% probability that Samurai vs. Robots will be released.
c) If the probability that Samurai Games will release their game Samurai vs. Robots changes from 75% to 70% what is the new expected profits from Ninjas vs. Pirates?
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