The computer-gaming market in the United States is estimated at billion as of (VentureBeat website). Consider the case of Video Tech, a computer-gaming company located in San Jose, California. It is considering the production of one of two new video games for the coming holiday season: Battle Pacific or Space Pirates. Battle Pacific is a unique game and appears to have no competition. Estimated profits (in thousands of dollars) under high, medium, and low demand are as follows: Excel File: data20-05a. xls
Demand
Battle Pacific High Medium Low
Profit $1,200 $600 $400
Probability 0.1 0.7 0.2
Video Tech is optimistic about its Space Pirates game. However, the concern is that profitability will be affected by a competitor's introduction of a video game viewed as similar to Space Pirates. For planning purposes, Video Tech believes there is a probability that its competitor will produce a new game similar to Space Pirates. Estimated profits (in thousands of dollars) with and without competition are as follows:
Excel File: data20-05b. xls
Space Pirates Demand
With Competition High Medium Low
Profit $800 $400 $200
Probability 0.2 0.6 0.2
Excel File: data20-05c. xls
Space Pirates Demand
Without Competition High Medium Low
Profit $1,600 $800 $400
Probability 0.7 0.2 0.1
a. Choose the correct decision tree for the Video Tech problem.
A.
B.