Use the payoff matrix to determine the best strategy. A computer manufacturer must decide whether or not to market a new product. The new product may or may not be better than the old product. If they market the new product and it is better than the old product, their sales should increase. If they market the new product and it is not better, they will lose money to competitors. If they do not market the new product, they will lose to competitors if it is actually better and will lose just the research costs if it is not better. The manufacturer estimates that the payoff matrix is as follows:
New Product Better New Product Not Better
Market New Product $50,000 -$30,000
Don't Market New Product -$20,000 -$10,000
The manufacturer believes that the probability that the new product is better is 40%. What is the best strategy?
A) Market the new product.
B) Do not market the new product.
C) The payoff is the same for both strategies.
New Product Not Better