A circus is scheduled to appear in a city on a given date. The profits obtained are heavily dependent on the weather which can be classified as "good" or" bad". The circus owners may choose to setup operations in a large open field that is centrally located or rent a small building to stage a small version of the circus. The small building is not expected to be adversely affected by bad weather – thus will not affect the circus for it is well secure and has covered parking for the guests. The following shows the profits of the options and states of nature: Decision alternatives Set up in field Rent small building Probability States of nature Good $14,500 $5,000 P(G)=0.5 Bad -$15,000 $4,000 P(B)=0.5 The circus owners may choose to delay the decision until the day before the event is due. At this time they can obtain the one-day weather report (free) which is usually reliable. This delay will however increase their set up cost by $1000.00 or if they choose to rent, the rental cost will go up by $1500. The following is the reliability of the weather forecasters who will report that the weather will be either rainy or sunny: Forecast report Sunny Rainy Reliability of forecast Good 0.7 0.3 Bad 0.2 0.8 That is P(S/G) =0.7; P(R/G) =0.3; P(S/B) =0.2; P(R/B) =0.8 After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help the circus make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs the revised probabilities b) Fold back the decision tree It also includes to determine the best strategy for the circus; you must state
A circus is scheduled to appear in a city on a given date. The profits obtained are heavily dependent on the weather which can be classified as "good" or" bad". The circus owners may choose to setup operations in a large open field that is centrally located or rent a small building to stage a small version of the circus. The small building is not expected to be adversely affected by bad weather – thus will not affect the circus for it is well secure and has covered parking for the guests. The following shows the profits of the options and states of nature: Decision alternatives Set up in field Rent small building Probability States of nature Good $14,500 $5,000 P(G)=0.5 Bad -$15,000 $4,000 P(B)=0.5 The circus owners may choose to delay the decision until the day before the event is due. At this time they can obtain the one-day weather report (free) which is usually reliable. This delay will however increase their set up cost by $1000.00 or if they choose to rent, the rental cost will go up by $1500. The following is the reliability of the weather forecasters who will report that the weather will be either rainy or sunny: Forecast report Sunny Rainy Reliability of forecast Good 0.7 0.3 Bad 0.2 0.8 That is P(S/G) =0.7; P(R/G) =0.3; P(S/B) =0.2; P(R/B) =0.8 After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help the circus make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs the revised probabilities b) Fold back the decision tree It also includes to determine the best strategy for the circus; you must state
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...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 4 images
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
-
Fold back the decision tree (5 marks) to determine the best strategy for the circus; you must state this strategy (1 mark). What is the final expected profit?
Solution
by Bartleby Expert
Recommended textbooks for you
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.