Here are the changes to the original problem and the revised conditions for this decision-making problem: With a favorable market, John Thompson thinks a large facility would result in a net profit of $190,000 to his firm. If the market is unfavorable, the construction of a large facility would result in $190,000 net loss. A small plant would result in a net profit of $120,000 in a favorable market, but a net loss of $30,000 would occur if the market was unfavorable. Doing nothing would result in $0 profit in either market conditions. a) Create a decision table, like the one presented on Table 3.1 (page #65). b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the guidance from your textbook and create a table similar to Table 3.2 (page #66). c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the guidance from your textbook and create a table similar to Table 3.3 (page #66). d) What is your recommendation if you would apply the Criterion of Realism (Hurwicz Criterion) with a coefficient of realism a = 0.7. Follow the guidance from your textbook and create a table similar to Table 3.4 (page #67). e) What is your recommendation if you would apply the Equally Likely criterion (Laplace)? Follow the steps from your textbook and create a table similar to Table 3.5. f) What is your recommendation if would apply the Minimax Regret criterion. Follow the guidance from your textbook and create 3 tables similar to Tables 3.6, 3.7 and 3.8 (pages 68-69). g) What is your recommendation if you would apply the Expected Monetary Value, assuming that the probability of a favorable market is 60% and the probability of an unfavorable market is 40%. Follow the guidance from your textbook and create a table similar to Table 3.9 (page 70).
Here are the changes to the original problem and the revised conditions for this decision-making problem: With a favorable market, John Thompson thinks a large facility would result in a net profit of $190,000 to his firm. If the market is unfavorable, the construction of a large facility would result in $190,000 net loss. A small plant would result in a net profit of $120,000 in a favorable market, but a net loss of $30,000 would occur if the market was unfavorable. Doing nothing would result in $0 profit in either market conditions. a) Create a decision table, like the one presented on Table 3.1 (page #65). b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the guidance from your textbook and create a table similar to Table 3.2 (page #66). c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the guidance from your textbook and create a table similar to Table 3.3 (page #66). d) What is your recommendation if you would apply the Criterion of Realism (Hurwicz Criterion) with a coefficient of realism a = 0.7. Follow the guidance from your textbook and create a table similar to Table 3.4 (page #67). e) What is your recommendation if you would apply the Equally Likely criterion (Laplace)? Follow the steps from your textbook and create a table similar to Table 3.5. f) What is your recommendation if would apply the Minimax Regret criterion. Follow the guidance from your textbook and create 3 tables similar to Tables 3.6, 3.7 and 3.8 (pages 68-69). g) What is your recommendation if you would apply the Expected Monetary Value, assuming that the probability of a favorable market is 60% and the probability of an unfavorable market is 40%. Follow the guidance from your textbook and create a table similar to Table 3.9 (page 70).
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Question
D, E, F, G please. Table is provided
Transcribed Image Text:ALTERNATIVE
FAVORABLE MARKET ($)
UNFAVORABLE MARKET ($)
EMV ($)
Construct a large plant
200,000
-180,000
10,000
Construct a small plant
100,000
-20,000
40,000
Best EMV
Do nothing
0.
0.
Probabilities
0.50
0.50
EMV (large plant) = ($200,000) (0.50) + (-$180,000) (0.50) = $10,000
EMV (small plant) = ($100,000) (0.50) + (–$20,000) (0.50) = $40,000
EMV (do nothing) = ($0) (0.50) + ($0) (0.50) = $0
The largest expected value ($40,000) results from the second alternative, "construct a small plant." Thus,
Thompson should proceed with the project and put up a small plant to manufacture storage sheds. The EMVS
for constructing the large plant and for doing nothing are $10,000 and $0, respectively.-
11
70
Transcribed Image Text:Here are the changes to the original problem and the revised conditions for this decision-making problem:
With a favorable market, John Thompson thinks a large facility would result in a net profit of $190,000
to his firm.
If the market is unfavorable, the construction of a large facility would result in $190,000 net loss.
A small plant would result in a net profit of $120,000 in a favorable market, but a net loss of $30,000
would occur if the market was unfavorable.
Doing nothing would result in $0 profit in either market conditions.
a) Create a decision table, like the one presented on Table 3.1 (page #65).
b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the
guidance from your textbook and create a table similar to Table 3.2 (page #66).
c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the
guidance from your textbook and create a table similar to Table 3.3 (page #66).
d) What is your recommendation if you would apply the Criterion of Realism (Hurwicz Criterion) with a
coefficient of realism a = 0.7. Follow the guidance from your textbook and create a table similar to
Table 3.4 (page #67).
e) What is your recommendation if you would apply the Equally Likely criterion (Laplace)? Follow the
steps from your textbook and create a table similar to Table 3.5.
f) What is your recommendation if would apply the Minimax Regret criterion. Follow the guidance from
your textbook and create 3 tables similar to Tables 3.6, 3.7 and 3.8 (pages 68-69).
g) What is your recommendation if you would apply the Expected Monetary Value, assuming that the
probability of a favorable market is 60% and the probability of an unfavorable market is 40%. Follow
the guidance from your textbook and create a table similar to Table 3.9 (page 70).
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