7. Lawson's Department Store faces a buying decision for a seasonal product for which demand can be high, medium, or low. The purchaser for Lawson's can order 1, 2, or 3 lots of the product before the season begins but cannot reorder later. Profit projections (in thousands of dollars) are shown. State of Nature High Demand Medium Demand Low Demand Decision Alternative S1 S2 Order 1 lot, di Order 2 lots, dz Order 3 lots, dz 60 60 50 80 80 30 100 70 10 b. At each preseason sales meeting, the vice president of sales provides a personal opinion regarding potential demand for this product. Because of the vice president's enthusiasm and optimistic nature, the predictions of market conditions have always been either "excellent" (E) or "very good" (V). Probabilities are as follows: P(E) = 0.70 P(V) = 0.30 P(s1|E) = 0.34 P(s2|E) = 0.32 P(s3|E) = 0.34 P(s1|V) = 0.20 P(s2 |V) = 0.26 P(s3|V) = 0.54 %3D %3D %3D %3D %3D %3D
7. Lawson's Department Store faces a buying decision for a seasonal product for which demand can be high, medium, or low. The purchaser for Lawson's can order 1, 2, or 3 lots of the product before the season begins but cannot reorder later. Profit projections (in thousands of dollars) are shown. State of Nature High Demand Medium Demand Low Demand Decision Alternative S1 S2 Order 1 lot, di Order 2 lots, dz Order 3 lots, dz 60 60 50 80 80 30 100 70 10 b. At each preseason sales meeting, the vice president of sales provides a personal opinion regarding potential demand for this product. Because of the vice president's enthusiasm and optimistic nature, the predictions of market conditions have always been either "excellent" (E) or "very good" (V). Probabilities are as follows: P(E) = 0.70 P(V) = 0.30 P(s1|E) = 0.34 P(s2|E) = 0.32 P(s3|E) = 0.34 P(s1|V) = 0.20 P(s2 |V) = 0.26 P(s3|V) = 0.54 %3D %3D %3D %3D %3D %3D
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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III. What is the expected value of sample information
IV. What is the efficiency of the survey information
Transcribed Image Text:7. Lawson's Department Store faces a buying decision for a seasonal product for which
demand can be high, medium, or low. The purchaser for Lawson's can order 1, 2, or 3 lots of
the product before the season begins but cannot reorder later. Profit projections (in
thousands of dollars) are shown.
State of Nature
High Demand
Medium Demand
Low Demand
Decision Alternative
S1
Order 1 lot, di
Order 2 lots, dz
Order 3 lots, dz
60
80
60
50
80
30
100
70
10
b. At each preseason sales meeting, the vice president of sales provides a personal opinion
regarding potential demand for this product. Because of the vice president's enthusiasm
and optimistic nature, the predictions of market conditions have always been either
"excellent" (E) or "very good" (V). Probabilities are as follows:
P(s1 |E) = 0.34
P(s2|E) = 0.32
P(s3|E) = 0.34
P(s1|V) = 0.20
P(s2|V) = 0.26
P(s3|V) = 0.54
P(E)
0.70
P(V) = 0.30
%3D
%3D
%3D
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