Customers buy cars from three auto companies. Given the company from which a customer last bought a car, the probability that she will buy her next car from each company is as follows:
a If someone currently owns a company 1 car, what is the probability that at least one of the next two cars she buys will be a company 1 car?
b At present, it costs company 1 an average of $5,000to produce a car, and the average price a customer pays for one is $8,000. Company 1 is considering instituting a five-year warranty. It estimates that this will increase the cost per car by $300, but a market research survey indicates that the probabilities will change as follows:
Should company 1 institute the five-year warranty?
