A telecom company is considering upgrading their infrastructure in your city and they have hired G&B Consulting

A telecom company is considering upgrading their infrastructure in your city and they have hired G&B Consulting. The telecom company would be willing to invest in upgraded lines that offer higher speeds and bandwidth, but it is costly to do so and they are afraid they might make the investment but not have customers willing to upgrade their services which would be needed to recoup their profits. The alternative would be to keep the old infrastructure, but there are already a high amount of service complaints from the customer base. The telecom company needs to determine if investing in the improved service will pay off for them by having a sufficient amount of customers buy the upgraded service. You have been tasked with helping them determine their optimum strategy.

Deliverable 06 – Worksheet The market research team working on this project creates this payoff matrix that represents the scaled values that customers give to the different levels of service and the corresponding payoffs for the telecom company: Telecom Company Customer Buy Don’t Buy Upgrade (4, 4) (0, 2) Don’t Upgrade (6, 0) (2, 2) You recognize that the payoff matrix is not the best way to analyze this scenario. You will construct a game tree to model the scenario and perform backwards induction to find the optimum strategy, explaining all of your reasoning along the way. Slide 1 • • Explain why a game tree must be used in this scenario instead of a payoff matrix. Identify who will go first in the game Slide 2 • • Draw the game tree that represents the scenario using the payoff matrix given above. Identify and explain any non-credible threats. Slide 3 • • Redraw the game tree with any non-credible threats removed. Identify and explain where the first step of backwards induction will occur. Slide 4 • • Using the game tree from slide 3, perform the first step of backwards induction. Explain your reasoning behind the step you took. Slide 5 • • Redraw the game tree after the first step of backwards induction. Identify where the next step of backwards induction occurs. Slide 6 • • Slide 7 Using the game tree from slide 5, perform the next step of backwards induction. Explain your reasoning behind the step you took. • • Redraw the game tree after the step you took in slide 6. Identify the optimum strategy of the game.