An airline decided to offer direct service from City A to City B. Management must decide between a full price service using the company's new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best choice depends on the market reaction to the service the airline offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to City B: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars). Service Full price Discount Demand for Service Strong $980 $660 Weak -$510 $330 (a) What is the decision to be made, what is the chance event, and what is the consequence for this problem? The decision to be made is ---Select--- ✓. The chance event is ---Select--- The consequence is ---Select--- How many decision alternatives are there? How many outcomes are there for the chance event? (b) If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches? The recommended decision using the optimistic approach is the ---Select--- service. The recommended decision using the conservative approach is the ---Select--- service. The recommended decision using the minimax regret approach is the ---Select--- ✓ service.
An airline decided to offer direct service from City A to City B. Management must decide between a full price service using the company's new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best choice depends on the market reaction to the service the airline offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to City B: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars). Service Full price Discount Demand for Service Strong $980 $660 Weak -$510 $330 (a) What is the decision to be made, what is the chance event, and what is the consequence for this problem? The decision to be made is ---Select--- ✓. The chance event is ---Select--- The consequence is ---Select--- How many decision alternatives are there? How many outcomes are there for the chance event? (b) If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches? The recommended decision using the optimistic approach is the ---Select--- service. The recommended decision using the conservative approach is the ---Select--- service. The recommended decision using the minimax regret approach is the ---Select--- ✓ service.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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Operation management
Transcribed Image Text:An airline decided to offer direct service from City A to City B. Management must decide between a full price service using the
company's new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best
choice depends on the market reaction to the service the airline offers. Management developed estimates of the contribution
to profit for each type of service based upon two possible levels of demand for service to City B: strong and weak. The
following table shows the estimated quarterly profits (in thousands of dollars).
Service
Full price
Discount
Demand for Service
Strong
$980
$660
Weak
-$510
$330
(a) What is the decision to be made, what is the chance event, and what is the consequence for this problem?
The decision to be made is ---Select---
The chance event is ---Select---
The consequence is ---Select---
How many decision alternatives are there?
How many outcomes are there for the chance event?
(b) If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the
optimistic, conservative, and minimax regret approaches?
The recommended decision using the optimistic approach is the ---Select--- service. The recommended decision using
the conservative approach is the ---Select--- service. The recommended decision using the minimax regret approach is
the ---Select--- ✓ service.
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