The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.DecisionAlternatived₁d₂States of NatureS1 S2 S3260 110 35110 110 85If S1then ---Select--- ✓ ; If s₂ then ---Select--- ✓ ; If S3 then ---Select---The probabilities for the states of nature are P(s₁) = 0.65, P(s₂) = 0.15, and P(S3) = 0.20.(a) What is the optimal decision strategy if perfect information were available?(b) What is the expected value for the decision strategy developed in part (a)?(c) Using the expected value approach, what is the recommended decision without perfect information? What is its expected value?The recommended decision without perfect information is |---Select---EV =(d) What is the expected value of perfect information?EVPI =

Given data: Decision Alternative State of nature S1 S2 S3 d1 260 110 35 d2 110 110 85…

Answered: The following payoff table shows profit…

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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A farmer is trying to decide if continuing to farm is the correct thing to do. Yields on his fields have been declining over the past several seasons. He has an offer on the table from a corporate farmer to lease his land for the season for $15,000. Whether or not he accepts this offer depends on how well his fields will produce and the market value of his crops. If yield is high, the farmer will make $50,000 and there is a 10% possibility of this occurring. If yield is medium, the farmer will make $20,000 and there is a 50% possibility of this occurring. If yield is low, the farmer will make $12,000 and there is a 40% possibility of this occurring. Draw a decision tree for this problem. What should the farmer do according to the decision tree? If the farmer could get more information that would help him predict his yield, what is the maximum amount that he should pay for this information?
An electronics factory operates on four production lines: laptops, mobiles, desktop computers, smart boards, and there were three cases of demand (weak, medium, and high), and the matrix of returns was as follows: Laptops Mobiles Risk Desktop Computers Smart Boards High 40 45 35 30 Economic state Medium 25 15 30 20 1. The problem presented above is decision-making under Certainty Uncertainty Weak 10 5 -10 -5 Save All Answers Save and Submit
Which types of decisions should the decision trees be used to address for?
JayZee Electronics wanted to expand its operations by considering of putting up another warehouse to store their electronic supplies from different suppliers. The table below shows the payoff for all alternatives available for JayZee Electronics in all 3 states of nature. The probabilities for every state of nature is also provided. Size of the Warehouse Good Market ($) Fair Market ($) Poor Market ($) Small 40,000 -10,000 -20,000 18,000 Medium 80,000 90,000 Large Very Large -40,000 -160,000 100,000 175,000 350,000 25,000 Probabilities 0.35 0.45 0.20 Using Decision Making under Uncertainty (Use Sheet 1 and rename it to Lastname_Uncertainty) (a) Develop a decision table for this decision. (b) What is the maximax decision? (c) What is the maximin decision? (d) What is the equally likely decision? (e) What is the criterion of realism decision? Use an a value of 0.8. (f) Develop an opportunity loss table. (g) What is the minimax regret decision? Using Decision Making under Risk (Use Sheet 1…
In Benefit/cost ratio analysis, if the salvage value is used to recover the first cost, it is being considered as: Select one: a. negative cost b. cost c. benefit d. disbenefit =================== Ali takes out a loan at 10 percent compounded annually for 7 years. At the end of this period, he pays off the loan at a value of $23,384.61. What amount did he borrow? Select one: a. $12,000.00 b. $15,000.00 c. $14,000.00 d. $13,000.00 ============= While considering the engineering economy concepts, the most important tense almost all exercises deal with is the annual worth. Select one: True False Ans all
Government officials must decide how to reduce the amount of Magentum being adulterated in the future. According to Becker, which of the following are options that could get the same expected cost of crime commission? 1 - Increase the probability of detection and conviction and combine that with a low sanction. 2 - Change the opportunity cost of the crime. 3 - Keep a low risk of probability of detection and conviction but impose a very high sanction. 1 and 3 1, 2, 3 1 and 2 2 and 3
Assume that alternatives A, B,C, D are considered. Alternative C is better than each of the other 3 alternatives in all the 10 attributes considered, except one, but this one C is by far the worst. Which of the decision making models below would be the mostly likely to result in aliminating alternative C? a) addictive weighting b) dominance c) satisficing d) disjunctive resolution
A small parts manufacturer has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand, an average market demand or low market demand. The following table summarizes the company's decision situation (profits in thousands of dollars). Alternative 00 540 300 240 O 100 30% High Dem. 1,000 Expand Facilities Acquire Competitor Subcontract Production What is the Expected Value of Perfect Information for the small parts manufacturer? 800 Ave. Dem. 200 600 -300 30% 100 Low Dem. -1,000 -400 0
A paint company has three sources for buying bright red pigment for its paints: Vietnam, Taiwan, and Thailand. Unfortunately, the pigment is made from a bush whose annual growth is heavily dependent upon the amount of rainfall during the growing season. The following tables show probabilities and prices for wet, dry, and normal growing seasons. Probabilities Wet Dry Normal Vietnam 0.5 0.2 Taiwan 0.6 0.3 Thailand 0.4 0.4 Price/Pound ($) Vietnam 0.96 1.11 Taiwan 0.86 1.25 Wet Dry Normal Thailand 0.92 1.19 0.3 What country shoul the company select? Thailand Taiwan Vietnam 0.1 0.2 1.05 0.99 1.06 What is the expected value (price) associated with it?
The University of Miami bookstore stocks textbooks in preparation for sales each semester. It normally relies on departmental forecasts and preregistration records to determine how many copies of a text are needed. Preregistration shows 85 operations management students enrolled, but bookstore manager Vaidy Jayaraman has second thoughts, based on his intuition and some historical evidence. Vaidy believes that the distribution of sales may range from 65 to 85 units, according to the following probability model: Demand Probability 65 0.05 Stock 65 70 75 80 85 70 0.25 This textbook costs the bookstore $82 and sells for $107. Any unsold copies can be returned to the publisher, less a restocking fee and shipping, for a net refund of $30. a) Based on the given information, Vaidy's conditional profits table for the bookstore is: Demand 75 P=0.30 65 P = 0.05 0000 70 P = 0.25 75 0.30 ☐☐☐☐ 80 0.15 00000 80 85 P = 0.15 P = 0.25 30000 85 0.25 ☐☐☐☐
The XY Manufacturing Company must decide whether to manufacture a component part at its plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in ten thousand of pesos): Decision Alternative Manufacture, d₁ Purchase, d₂ Low Demand $1 -100 50 State of Nature Medium Demand S2 200 225 High Demand S3 500 350 MA The state-of-nature probabilities are P(s₁) = 0.35, P(s₂) = 0.35, and P(S3) = 0.30. a. Use a decision tree to recommend a decision. b. Use EVPI to determine whether XY Manufacturing Company should attempt to obtain a better estimate of demand.
An oil company must decide whether or not to drill an oil well in a particular area that they already own. The decision maker (DM) believes that the area could be dry, reasonably good or a bonanza. See data in the table which shows the gross revenues for the oil well that is found. Decision Drill $0 Abandon $0 Probability 0.3 Dry (D) Seismic Results No structure(N) Open(0) Closed (C) Drilling costs 40M. The company can take a series of seismic soundings (at a cost of 12M) to determine the underlying geological structure. The results will be either "no structure", "open structure or "closed structure". The reliability of the testing company is as follows that is, this reflects their historical performance. Reasonably good(G) $85 $0 0.3 Note that if the test result is "no structure" the company can sell the land to a developer for 50 m. otherwise (for the other results) it can abandon the drilling idea at no benefit to itself. Dry(d) 0.7 0.2 Bonanza(B) 0.1 $200 m SO 0.4 Conditional…

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