The choice among Options 1,2 and 3 is a strategic decision. As with most strategic decisions, what Emma decides will significantly affect her operating income (or loss), depending on the demand for the product. Faced with this uncertainty, Emma’s choice will be influenced by her confidence in the level of demand for GMAT Success packages and her willingness to risk losses if demand is low. For example, if Emma’s tolerance for risk is high’ she will choose Option 1 with its high potential rewards. If, however, Emma is risk averse, she will prefer Option 3, where the rewards are smaller if sales are high but where she never suffers a loss if sales are low.