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A.2 Even though independent gasoline stations have been having a difficult time, Ian Langella has been thinking about starting his own independent gasoline station. Ian's problem is to decide how large his station should be. The annual returns will depend on both the size of his station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Ian developed the following table: SIZE OF FIRST STATION Small Medium Large Very large GOOD MARKET $ 50,000 $ 80,000 $100,000 $300,000 FAIR MARKET $20,000 $30,000 $30,000 $25,000 POOR MARKET -$ 10,000 -$20,000 -$ 40,000 -$160,000 For example, if Ian constructs a small station and the market is good, he will realize a profit of $50,000. a) Develop a decision table for this decision, like the one illus- trated in Table A.2. b) What is the maximax decision? c) What is the maximin decision?

A.2 Even though independent gasoline stations have been having a difficult time, Ian Langella has been thinking about starting his own independent gasoline station. Ian's problem is to decide how large his station should be. The annual returns will depend on both the size of his station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Ian developed the following table: SIZE OF FIRST STATION Small Medium Large Very large GOOD MARKET $ 50,000 $ 80,000 $100,000 $300,000 FAIR MARKET $20,000 $30,000 $30,000 $25,000 POOR MARKET -$ 10,000 -$20,000 -$ 40,000 -$160,000 For example, if Ian constructs a small station and the market is good, he will realize a profit of $50,000. a) Develop a decision table for this decision, like the one illus- trated in Table A.2. b) What is the maximax decision? c) What is the maximin decision?

Practical Management Science
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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Answer A.2 a-e

a-c is in the picture here is d and e 

d) What is the qually likely decision?

e) Develop a decision tree. Assume each outcome is equally likely, then find the highest EMV.

...A.2 Even though independent gasoline stations have been having a difficult time, Ian Langella has been thinking about starting his own independent gasoline station. Ian's problem is to decide how large his station should be. The annual returns will depend on both the size of his station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Ian developed the following table: SIZE OF FIRST STATION Small Medium Large Very large GOOD MARKET $ 50,000 $ 80,000 $100,000 $300,000 FAIR MARKET $20,000 $30,000 $30,000 $25,000 POOR MARKET -$ 10,000 -$20,000 -$ 40,000 -$160,000 For example, if Ian constructs a small station and the market is good, he will realize a profit of $50,000. a) Develop a decision table for this decision, like the one illus- trated in Table A.2. b) What is the maximax decision? c) What is the maximin decision?
Transcribed Image Text:...A.2 Even though independent gasoline stations have been having a difficult time, Ian Langella has been thinking about starting his own independent gasoline station. Ian's problem is to decide how large his station should be. The annual returns will depend on both the size of his station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Ian developed the following table: SIZE OF FIRST STATION Small Medium Large Very large GOOD MARKET $ 50,000 $ 80,000 $100,000 $300,000 FAIR MARKET $20,000 $30,000 $30,000 $25,000 POOR MARKET -$ 10,000 -$20,000 -$ 40,000 -$160,000 For example, if Ian constructs a small station and the market is good, he will realize a profit of $50,000. a) Develop a decision table for this decision, like the one illus- trated in Table A.2. b) What is the maximax decision? c) What is the maximin decision?
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