MGM330-0704A-04 Business Decision-Making - Phase 2 DB Essay

MGM330-0704A-04 Business Decision-Making - Phase 2 DB - Essay Example The three options of credit discount incentive offers are cash back on online purchases, cash back on purchases at clothing stores and entry into a sweepstakes every time the customer utilizes the credit card. The key quantitative tool that determines which option is more attractive for the customer is probability. Probability is the chance of an event occurring (McClave & Benson & Sincich, 2001). For example if a person flips a coin which has only two possible outcomes the probability of the coin landing on heads is 50%. The Piggy case provides some research which can help a statistician determine the probability of a client winning a sweepstakes. The odds of winning a prize are 1 in 1000, thus the chances of winning are 0.1%. The company determines that the average American makes 52 credit card purchases a year. Each of these 52 occurrences represents a separate event with a probability of 0.1% of winning the prize. The value the customer receives can be compared to buying 52 one d ollar lotto tickets. There are lotteries that offer a 1 in 1000 chance of winning $500 when a person purchases a $1 ticket. The attractiveness of this option depends of what is the actual prize of the sweepstakes the company is offering. The other probability of the other two option can not be determine right now without additional data, but this does not mean that an initial analysis can not be performed. As far as the probability the two options follow a different probability called subjective probability. Subjective probability utilizes statistical models based on past information in which two different players may have different probabilities for the occurrence of a same event (Levine & Stephan & Krehbiel & Berenson, 2006). To understand this concept lets analyze each option. The online purchases option implies that a person will be attractive by the incentive because the customer can get cash on online