1. Decision Rules.A company is choosing a motorized mechanism for a new toy, a dancing ballerina(TippiToes) that is currently under development. Demand is uncertain. but thecompany is confident that demand will be: Light (25,000 units), Moderate (100,000units) or Heavy (150,000) units.The payoff table for each mechanism (in $) is given below.Action: Choice of MechanismEventGears and LeversSpringWeights and PulleysPneumaticLight25,000-10,000-125,000-300,000Moderate400,000440,000400,000300,000Heavy650,000740,000750,000700,000Questions:(1) Apply Maximax, Maximin, Minimax Regret, and EMV rules (assuming that theprobability of Light demand is 0.1, Moderate demand is 0.7, and Heavydemand is 0.2) to decide what mechanism should the company choose?(2) What is the expected value of perfect information?(3) Draw a decision tree to solve this problem.

Answered: 1. Decision Rules. A company is…

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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