You should complete the long question according to the lecture notes( including 11 attachments).
Long question 1 (10 points)
To test whether a proposed incentive program would increase productivity, a manager applied the program to a group of workers who had the lowest productivity. A month later, their productivity indeed increased. Give five viable explanations to the increase in productivity. (2 points for each reasonable explanation spotted)
Long question 2 (10 points)
Airlines often charge higher airfares during busy seasons (e.g., in the summer) than during slow seasons. Most consumers consider this practice fair and do not complain. Now, suppose that you are the owner of a small store, and you are the only store in the region that carries face mask.
Because of the recent COVID pandemic there is a great increase in demand for face mask, and you doubled the price of the mask. Having no other choices, many residents still bought masks from you. However, they were angry and considered you unfair. Your store’s reputation is badly damaged. Please list the key differences between what you did and what the airlines do which you think make consumers react so differently in the two cases.
Long question 3 (10 points)
You are the owner of a computer software company. Instead of buying, many people illegally copy your software from their friends and relatives. Propose two designs or strategies that would make consumers feel guiltier if they copy your software. The strategies should be based on psychological principles. For example, to reduce the price of your software is not an acceptable strategy for this question.
Long question 4 (10 points)
Toro had begun in 1914 by making tractor engines and later branched out into lawn mowers. In the early 1960’s they added snow throwers. By 1984 they offered a full range of products for “outdoor care” to both institutional and residential customers. Residential lawn care products constituted about 40-50% of sales, with snow throwers accounting for a further 10-15%.
Snow thrower sales were channeled through twenty-six regional distributors who supplied snow throwers to independent retailers, such as hardware stores and lawn and garden centers, across
the snow belt (a number of regions near the Great Lakes in North America where heavy snowfall in the form of lake-effect snow is particularly common). Toro also sold directly to mass merchandisers, like Marshall Field, whose private labels made up about 30-35% of Toro snow thrower sales. Although snow throwers were sold throughout the year, 60-70% of sales occurred during November, December, and January, dropping off during the ensuing months and becoming minimal during the summer. Sales were especially strong in a year following a severe winter, presumably because people resolved not to be “caught again.”
The Toro product line included the newly-introduced lightweight power shovel, as well as the more traditional single-stage and two-stage models. The (smaller) single-stage machines, with suggested retail prices between $270 and $440, had been selling in excess of 100,000 units per year. The self-propelled two-stage machines, ranging in price from $640 to $1500, had been selling at somewhat less than 20,000 units per year.
These figures were a far cry from the heady days of the late 1970’s when several years of strong growth had culminated in two year, 1978-1979 and 1979-80, of exceptionally high sales. During that time Toro sold approximately 800,000 single-stage and 125,000 two-stage machines. The severity of the three winters beginning in 1977/1978 created a demand that rewarded dealers for their aggressive inventories.
The following year, 1980/1981 sales plummeted. Dealers and distributors were left with unsold inventories that in some cases lasted them three years. Toro not only had to forego the lost income as orders fell to a trickle but they also offered to pay some of the huge holding costs faced by their dealers. There next two winters were equally mild, causing a sharp downturn in Toro’s fortunes. Dealers had become disenchanted with the snow removal equipment. The outlook was bleak.
1) In general, why were consumers reluctant to purchase snow throwers? (5 points)
2) Describe some marketing/promotional strategies Toro could use to improve sales. (5 points)
Long question 5 (10 points)
You are debating whether or not to invest $180K in a R&D project aimed at developing a new product. There is a 50% chance that the project will be successful. If the project is successful, the company can choose between building a large plant which costs $400K or a small plant which costs $200K. The market size for the product may be large (50% probability), medium (30%
probability), or small (20% probability). The present value of the net cash flows corresponding to sales in a large, medium, and small market over the life of the plant are $1000K, $500K, and
$250K, respectively. However, a small plant can only cope with a small or medium market size, but not with a large market size; in other words, for a small plant, the net cash flow in a large market is the same as that for a medium market.
1) Draw a Decision Tree showing these choices. (6 points)
2) Based on the Decision Tree analysis, decide 1) whether to invest in large or small plant (2 points), 2) whether to invest in this project at all (2 points).
Long question 6 (20 points)
Mike is a fisherman living on a rural island. He is deciding to take one of the three potential jobs for today: A) working for the local store, with a fixed salary of HK$400 for sure, or B) fishing in the small river near his home, in which he could make either 0 (and no loss) or HK$1000, with equal probabilities; or C) fishing in the sea, in which he could lose HK$200 (e.g., the cost of the boat) or make HK$1500, with equal probabilities.
Assume that Mike’s expected utility (EU) function is x0.5, where x>=0, that his prospect theory (PT) value function is x0.5, where x>0, and that she is twice as sensitive to a loss than to a gain of the same size. Mike’s PT weighting function is the same as the probability of events.
6.1. If Mike is an expected value maximizer, which option will he choose? Back up your conclusion with calculations (3 points).
6.2 What are EU(A), EU(B), and EU(C) if Mike’s current wealth is worth HK$100? Based on the calculation, which option will he choose if Mike is an expected utility maximizer? (3 points)
6.3 What are EU(A), EU(B), and EU(C) if Mike’s current wealth is worth HK$300? Based on the calculation, which option will he choose if Mike is an expected utility maximizer? (2 points)
6.4 What are EU(A), EU(B), and EU(C) if Mike’s current wealth is worth HK$2000? Based on the calculation, which option will he choose if Mike is an expected utility maximizer? (2 points)
6.5 Suppose Mike has just moved to the island with HK$100 wealth, and local living cost is about HK$320 per day. Based on your analyses of results from 6.2, 6.3 and 6.4 (assuming Mike an expected utility maximizer), what kind of career path would you recommend Mike to take? (4 points)
6.6 What are Prospect Theory V(A), V(B), and V(C) if Mike’s current wealth is worth HK$100? Based on the calculation, which option will he choose if Mike is a PT utility maximizer? (3
6.7 What are Prospect Theory V(A), V(B), and V(C) if Mike’s current wealth is worth HK$2000? Based on the calculation, which option will he choose if Mike is a PT utility maximizer? (3 points)
EssayClue is an award-winning assignment help service provider. We have a team of professional tutors to help you with any assignment regardless of the the deadline. Contact us for immediate help.