A dress buyer for a large department store must place orders with the dress manufacturer 9 months before thedresses are needed. One decision is the number of knee-length dresses to stock. The ultimate gain to the departmentstore depends both on the decision and on the fashion prevailing 9 months later. The buyer's estimates of the gains(in thousands of pesos) are given below:DecisionOrder noneOrder a littleOrder moderatelyOrder a lotS1 knee lengths are highfashion-50-106080States of NatureS2 - knee lengths areacceptable0304540S3 - knee lengths are notacceptable8035-30-45a) Determine the decision if the buyer uses the minimax regret criterion.b) Based on the buyer's experience, the probability that S1 occurs is 45% and S3 is 25%. Using the expected valuesmethod, what will be the buyer's decision?c) Determine the EOL.d) Determine the posterior probabilities of having a high demand for fashion.e) Determine the posterior probabilities of having a low demand for fashion.f) Show the decision tree to determine the optimal policy of the decision.g) If you are the owner of this business, how much will you pay the research agency?Using the prior probabilities of the buyer in (b), the buyer decided to look for a research agency that will provide hima report whether there will be a high or low demand for fashion. Based on the research agency's experience, given S1,the probability of high demand is 0.70, probability of low demand given S2 is 0.40, and probability of low demandgiven S3 is 0.80.

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Answered: A dress buyer for a large department…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter13: Regression And Forecasting Models

Section13.3: Simple Regression Models

Problem 9P

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