Decision Trees
0.8- Competitor enters
New Product Line
£750,000
-£600,000
0.2 - Doesn't enter £1,250,000
250k
0.7 - No competitor
Do nothing £500,000
£0 (£500,000)
0.3 - Competitor Enters
New Product Line:
(0.8 x £750,000) + (0.2 x £1,250,000) =
600,000 + 250,000 = 850,000 - 600,000 = 250,000.
Leave it:
(0.7 x £500,000) + (0.3 x - £500,000) =
350,000 + 150,000 = 200,000k.
The best option is to introduce a new product line.
0.8- Competitor enters
New Product Line
£750,000
-£600,000
0.2 - Doesn't enter £1,250,000
250k
0.7 - No competitor
Do nothing £500,000
£0 (£500,000)
0.3 - Competitor Enters
New Product Line:
(0.8 x £750,000) + (0.2 x £1,250,000) =
600,000 + 250,000 = 850,000 - 600,000 = 250,000.
Leave it:
(0.7 x £500,000) + (0.3 x - £500,000) =
350,000 + 150,000 = 200,000k.
The best option is to introduce a new product line.
