1 2 A B C D E F A student is thinking about starting her own independent gasoline station and needs to decide how large her station should be. She has developed the following table of annual returns: G H I J K L M N Р R S T U 3 Size of the station 4 States of nature Regret table Growing Stable Declining Max EOL Size of 5 the station 6 Mini 7 Small Growing $44,000.00 $60,000.00 8 Medium $80,000.00 Stable Declining -$8,000.00 $7,000.00 $22,000.00 $11,000.00 $31,000.00 $21,000.00 Max Min Equal likelihood EMV Max pay Mini Small Medium 9 Large $110,000.00 $30,000.00 $41,000.00 Large 0 Very large $320,000.00 $26,000.00-$161,000.00 1 Probability 0.48 0.21 0.31 Very large Probability 0.48 0.21 0.31 probability payoff 2 Your tasks: 3 1. What is the maximax, maximin, equal likelihood and minimax regret decision? 4 (you need to develop your own regret table in order to answer minimax regret decision) 5 2. Develop a decision tree. Don't forget to prune the unwanted decision branches. 6 (label correctly including each alternative, states of nature, probability and payoff) 7 (put your final decision and the payoff amount in the sqare symbol). 18 Prune: 3%. Final payoff and decision (which alternative): 4%, each alternative payoff: 3% 9 Setup correctly: 5% 20 3. Identify EMV(expected monetary value, or expected value), EVwPI (expected value with 21 perfect information) and EVPI (expected value of perfect information).. 22 23 Your answer here: 24 Decision: 25 Maximax 26 Maximin 27 E. likelihood 28 Minimax 29 EMV 0 EVwPI 1 EVPI 32 33 Payoff Alternative 3% (1.5 to payoff, 1.5 to alternative) 3% (1.5 to payoff, 1.5 to alternative) 3% (1.5 to payoff, 1.5 to alternative) 8% (1.5 to payoff, 1.5 to alternative) 2% 3% 3%
1 2 A B C D E F A student is thinking about starting her own independent gasoline station and needs to decide how large her station should be. She has developed the following table of annual returns: G H I J K L M N Р R S T U 3 Size of the station 4 States of nature Regret table Growing Stable Declining Max EOL Size of 5 the station 6 Mini 7 Small Growing $44,000.00 $60,000.00 8 Medium $80,000.00 Stable Declining -$8,000.00 $7,000.00 $22,000.00 $11,000.00 $31,000.00 $21,000.00 Max Min Equal likelihood EMV Max pay Mini Small Medium 9 Large $110,000.00 $30,000.00 $41,000.00 Large 0 Very large $320,000.00 $26,000.00-$161,000.00 1 Probability 0.48 0.21 0.31 Very large Probability 0.48 0.21 0.31 probability payoff 2 Your tasks: 3 1. What is the maximax, maximin, equal likelihood and minimax regret decision? 4 (you need to develop your own regret table in order to answer minimax regret decision) 5 2. Develop a decision tree. Don't forget to prune the unwanted decision branches. 6 (label correctly including each alternative, states of nature, probability and payoff) 7 (put your final decision and the payoff amount in the sqare symbol). 18 Prune: 3%. Final payoff and decision (which alternative): 4%, each alternative payoff: 3% 9 Setup correctly: 5% 20 3. Identify EMV(expected monetary value, or expected value), EVwPI (expected value with 21 perfect information) and EVPI (expected value of perfect information).. 22 23 Your answer here: 24 Decision: 25 Maximax 26 Maximin 27 E. likelihood 28 Minimax 29 EMV 0 EVwPI 1 EVPI 32 33 Payoff Alternative 3% (1.5 to payoff, 1.5 to alternative) 3% (1.5 to payoff, 1.5 to alternative) 3% (1.5 to payoff, 1.5 to alternative) 8% (1.5 to payoff, 1.5 to alternative) 2% 3% 3%
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Help me with this practice problem step for step and show me the equations
Transcribed Image Text:1
2
A
B
C
D
E
F
A student is thinking about starting her own independent gasoline station and needs to decide
how large her station should be. She has developed the following table of annual returns:
G
H
I
J
K
L
M
N
Р
R
S
T
U
3
Size of
the station
4
States of nature
Regret table
Growing
Stable
Declining
Max
EOL
Size of
5
the station
6
Mini
7
Small
Growing
$44,000.00
$60,000.00
8
Medium
$80,000.00
Stable Declining
-$8,000.00 $7,000.00
$22,000.00 $11,000.00
$31,000.00 $21,000.00
Max
Min
Equal
likelihood
EMV
Max pay
Mini
Small
Medium
9
Large
$110,000.00
$30,000.00 $41,000.00
Large
0
Very large
$320,000.00
$26,000.00-$161,000.00
1
Probability
0.48
0.21
0.31
Very large
Probability
0.48
0.21
0.31
probability
payoff
2
Your tasks:
3 1. What is the maximax, maximin, equal likelihood and minimax regret decision?
4
(you need to develop your own regret table in order to answer minimax regret decision)
5 2. Develop a decision tree. Don't forget to prune the unwanted decision branches.
6 (label correctly including each alternative, states of nature, probability and payoff)
7 (put your final decision and the payoff amount in the sqare symbol).
18 Prune: 3%. Final payoff and decision (which alternative): 4%, each alternative payoff: 3%
9 Setup correctly: 5%
20 3. Identify EMV(expected monetary value, or expected value), EVwPI (expected value with
21 perfect information) and EVPI (expected value of perfect information)..
22
23 Your answer here:
24 Decision:
25 Maximax
26 Maximin
27 E. likelihood
28 Minimax
29 EMV
0 EVwPI
1 EVPI
32
33
Payoff
Alternative
3% (1.5 to payoff, 1.5 to alternative)
3% (1.5 to payoff, 1.5 to alternative)
3% (1.5 to payoff, 1.5 to alternative)
8% (1.5 to payoff, 1.5 to alternative)
2%
3%
3%
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