Question: Southland Corporation's decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars:
Long-Run Demand
Plant Size Low Medium High
Small 150 200 200
Large 50 200 500
a. What is the decision to be made, and what is the chance event for Southland's problem?
b. Construct a decision tree.
c. Recommend a decision based on the use of the optimistic, conservative, and minimax regret approaches.