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A firm is considering their pricing strategy. The firm wants to charge a price of $5 or $10. The number of units sold depends on the state of the...
A firm is considering their pricing strategy. The firm wants to charge a price of $5 or $10. The number of units sold depends on the state of the economy. If the economy is growing, the firm believes it will sell 953 units when it charges $5, and the firm believes it will sell 629 units when it charges $10. If there is a recession, the firm will sell 1057 units at a price of $5 and they will sell 348 units if they charge $10. The firm believes the probability of a growing economy is .6. The firm may set the price after they know the state of the economy. What is the expected value?