Management of the New Fangled Softdrink Company believes that the probability of a customer purchasing Red Pop or the company’s major completion, Super Cola, is based on the customer’s most recent purchase. Suppose the following transition probabilities are appropriate: …… 20pts
FROM
TO

Red Pop
Super Cola

Red Pop
0.9
0.1

Super Cola
0.1
0.9

Show the two-period tree diagram for a customer who last purchased Red Pop. What is the probability that this customer purchases Red Pop on the second purchase?
What is the long-run market share for each of these two products?
A Red Pop advertising campaign is being planned to increase the probability of attracting Super Cola customers. Management believes that the new campaign will increase the probability of a customer switching from Super Cola to Red Pop is 0.15. What is the projected effect of the advertising campaign on the market shares?

Peppy roaney believes that pizza is a much more versatile dish than most people realize. as the national marketing manager for pizza guys, he observed how consumers were delighted with barbecue pizza, hawaiian pizza, mexican pizza and other unique combinations. his suggestions for other unusual pizzas, however, were met with a negative response by his superiors. even some of his colleagues laughed at his ideas. peppy's confidence in his ability to understand the market has led him to focus on planning a business of his own. peppy realizes that he will take a risk when he leaves his job with pizza guys and embarks upon a new venture: peppy's pizzazzeria. peppy is excited about the potential of profitably catering to the unmet desires of pizza consumers. peppy is confident that peppy's pizzazzeria will be a success, but only if he has enough money to do things right. since peppy has very little personal wealth, he knows he must obtain financial assistance. in order to prepare for meetings with bankers and p

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