for full price
expected utility = 0.4 U(950) + 0.3 U(600) + 0.3 U(-400)
= 0.4 * 100 + 0.3 * 72 + 0.3 * 0
= 40 + 21.6
=61.6
for Discount
expected utility
= 0.4 *U(750) + 0.3*U(450) + 0.3 * U(300)
= 0.4 * 87+ 0.3 * 58 + 0.3 * 48
= 66.6
since 66.6 > 61.6
we choose Discount and expected utility =
66.6
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Question 8 (4 points) anagement must decide between a full-price service using the company's new fleet...
Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller-capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to Myrtle Beach: strong...
Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller-capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to Myrtle Beach: strong...
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