Question

Product Life: It is equally likely that the game will stay operational for 1,2,4,6, or 8 years, but there is a 10% possibility that the game will stay operational for the next 10 years. Microtransaction Rate: GSG estimates that there is a 50% chance that at least 30% of the players would purchase at least one in-game cash item, but there is also an equal chance that the number would fall below 10%.

GSG is confident that the distribution of the microtransaction rate closely resembles a bell shape.
Market Share: GSG believes its market share in year 1 would be at best 70%, most likely 35%, and at worst 10%.
Server Maintenance Cost: The annual server maintenance cost is equally likely to be any value between 8 million to 18 million.
Further Development Cost: To keep the players entertained, GSG would occasionally release brand new content to the game, and GSG is 90% certain that the development cost will be anywhere between 5 million and 10 million with an average of 7.5 million.
Piracy Rate: Due to GSG's lack of proper security, there is a 30% chance that each year, a bootleg version of the game with better content and player interaction would be setup at a private server that would slightly reduce GSG's market share.
a.What Risk function, including its parameters, is appropriate to simulate the Microtransaction Rate?

Answer 1

The appropriate risk function to simulate the Microtransaction Rate would be a normal distribution with a mean of approximately 20% and an estimated standard deviation.

Step-by-step explanation:

The appropriate risk function to simulate the Microtransaction Rate would be a normal distribution.

Since the distribution of the microtransaction rate closely resembles a bell shape, it indicates that the values are normally distributed. The parameters for this risk function would be the mean (average) and the standard deviation.

In this case, the mean of the microtransaction rate is not given. However, it states that there is a 50% chance that at least 30% of the players would purchase at least one in-game cash item, and an equal chance that the number would fall below 10%. Based on this information, we can estimate the mean to be around 20%.

The standard deviation is not given either. Therefore, we cannot determine the exact shape of the normal distribution. However, we can assume a reasonable range for the standard deviation based on the given information.

Using these estimated parameters, we can simulate the Microtransaction Rate by generating random values from a normal distribution with a mean of 20% and a suitable standard deviation.