Product introduction, part 4. For the product launch decision of Exercise 12, the economy isn’t looking that good. Your very cautious boss says that he thinks there’s a 60% chance of low sales, and a 30% chance of moderate sales. Which course should the company follow?

Exercise 12

Product introduction. A small company has the technology to develop a new personal data assistant (PDA), but it worries about sales in the crowded market. They estimate that it will cost $600,000 to develop, launch, and market the product. Analysts have produced revenue estimates for three scenarios: If sales are high, they will sell $1.2M worth of the phones; if sales are moderate, they will sell $800,000 worth; and if sales are low, they will sell only $300,000 worth. Construct a payoff table for this set of actions using net profit as the “payoff.” Don’t forget the possible action of doing nothing.