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D. Pizza King (PK) and Noble Greek (NG) are competitive pizza chains. PK believes there is...

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General Management

D. Pizza King (PK) and Noble Greek (NG) are competitive pizzachains. PK believes there is a 30% chance that NG will charge $8per pizza, a 50% that NG will charge $10 per pizza, and a 20%chance that NG will charge $12 per pizza. If PK charges price p1and NG charges price p2, PK will sell 100 + 25(p2 – p1) pizzas. Itcosts PK $6 to make a pizza. PK is considering charging $7, $8, $9,$10, or $11 per pizza. To maximize its expected profit, what priceshould PK charge for a pizza? Please use Excel and include allformulas used.

Answer & Explanation Solved by verified expert
4.2 Ratings (585 Votes)
Using the given P2 and P1 we get the sales then the profit foreach scenario then the expected profitStep 1Sale unitsPK Price7891011Step 2ProfitPK Price7891011Step 3Expected profitPK Price7891011ProbabilityNG    See Answer
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