Concept explainers
Publisher Marjory Duffin reveals that JungleBooks.com may be launching a promotional scheme in which it will offer either two books for the price of one, or three books for the price of two. (Marjory can’t quite seem to remember which and is not certain whether they will go with the scheme at all.) John O’Hagan’s marketing advisers Flood and O’Lara seem to have different ideas as to how to respond. Flood suggests that the company counter by offering three books for the price of one, while O’Lara suggests that it offer instead a free copy of the Finite Mathematics Student Solutions Manual with every purchase. After a careful analysis, O’Hagan comes up with the following payoff matrix, where the payoffs represent the number of customers, in thousands, he expects to gain from JungleBooks.com:
Use the above information in Exercises 43–48.
Competition JungleBooks.com CEO François Dubois has been told by someone with personal ties to OHaganBooks.com staff that OHaganBooks.com is in fact 80% certain to opt for the “3 for the price of 1” option and will certainly go with one of the two possible promos. What should JungleBooks.com do in view of this information, and what will the expected effect be on its customer base?
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