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    148-M-S-M-C (34) 5847

    Uploaded by

    Ahmed Awais
    The document discusses a company's belief that a customer's likelihood of purchasing its product, Red Pop, or a competitor's product, Super Cola, depends on the customer's previous purchase. It provides transition probabilities and asks: a) What is the probability a customer who last bought Red Pop will buy it again on the second purchase? b) What are the long-run market shares of each product? c) What will be the effect of a Red Pop advertising campaign aimed at attracting Super Cola customers by increasing the probability they will switch to 0.15?

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    © All Rights Reserved
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    148-M-S-M-C (34) 5847

    Uploaded by

    Ahmed Awais
    1K views2 pages
    The document discusses a company's belief that a customer's likelihood of purchasing its product, Red Pop, or a competitor's product, Super Cola, depends on the customer's previous purchase. It provides transition probabilities and asks: a) What is the probability a customer who last bought Red Pop will buy it again on the second purchase? b) What are the long-run market shares of each product? c) What will be the effect of a Red Pop advertising campaign aimed at attracting Super Cola customers by increasing the probability they will switch to 0.15?

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    148-M-S-M-C (34) 5847

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    The document discusses a company's belief that a customer's likelihood of purchasing its product, Red Pop, or a competitor's product, Super Cola, depends on the customer's previous purchase. It provides transition probabilities and asks: a) What is the probability a customer who last bought Red Pop will buy it again on the second purchase? b) What are the long-run market shares of each product? c) What will be the effect of a Red Pop advertising campaign aimed at attracting Super Cola customers by increasing the probability they will switch to 0.15?

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    1K views2 pages

    148-M-S-M-C (34) 5847

    Uploaded by

    Ahmed Awais
    The document discusses a company's belief that a customer's likelihood of purchasing its product, Red Pop, or a competitor's product, Super Cola, depends on the customer's previous purchase. It provides transition probabilities and asks: a) What is the probability a customer who last bought Red Pop will buy it again on the second purchase? b) What are the long-run market shares of each product? c) What will be the effect of a Red Pop advertising campaign aimed at attracting Super Cola customers by increasing the probability they will switch to 0.15?

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    Management of the New Fangled Softdrink Company believes that the probability of a

    customer purchasing Red Pop or the companys major competition, Super Cola, is based
    on the customers most recent purchase. Suppose that the following transition
    probabilities are appropriate:

    .:.
    a. Show the two-period tree diagram for a customer who last purchased Red Pop. What is
    the probability that this customer purchases Red Pop on the second purchase?
    b. What is the long-run market share for each of these two products?
    c. A Red Pop advertising campaign is being planned to increase the probability of
    attracting Super Cola customers. Management believes that the new campaign will
    increase to 0.15 the probability of a customer switching from Super Cola to Red Pop.
    What is the projected effect of the advertising campaign on the market shares?
    SOLUTION:
    a.

    .9

    .9

    RedPop

    RedPop (.9)(.9)=.81

    .1
    Super
    Cola

    (.9)(.1)=.09

    RedPop
    .1

    .1

    Super
    Cola

    RedPop (.1)(.1)=.01

    .9
    Super
    Cola

    (.1)(.9)=.09

    b.

    c.

    1 = 0.5, 2 = 0.5

    P=

    0.90
    L
    M
    010
    .
    N

    O
    P
    Q

    010
    .
    0.85

    = .6, 2 = .4

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