Western Plastic Surgery Associates is planning on opening a cosmetic plastic surgery center in Honolulu, San Francisco, or Seattle. There is a 60 percent chance that the demand for plastic surgery in the US will increase in the near future, a 25 percent chance that the number will remain the same, and a 15 percent chance that the number will decrease. The developer estimates that the following profits would result from the decision given each set of economic conditions. Location Increase (0.60) Same (0.25) Decrease (0.15) Honolulu San Francisco Seattle $1,102,000 $720,000 $800,000 $856,000 $640,000 $702,000 $502,000 $602,000 $220,000 a. Find the best decision using the following criteria: Maximax Maximin Laplace (Equal Likelihood) Minimax Regret The expected value (EMV) b. What is the Expected Value of Perfect Information (EVPI)
Western Plastic Surgery Associates is planning on opening a cosmetic plastic surgery center in Honolulu, San Francisco, or Seattle. There is a 60 percent chance that the demand for plastic surgery in the US will increase in the near future, a 25 percent chance that the number will remain the same, and a 15 percent chance that the number will decrease. The developer estimates that the following profits would result from the decision given each set of economic conditions. Location Increase (0.60) Same (0.25) Decrease (0.15) Honolulu San Francisco Seattle $1,102,000 $720,000 $800,000 $856,000 $640,000 $702,000 $502,000 $602,000 $220,000 a. Find the best decision using the following criteria: Maximax Maximin Laplace (Equal Likelihood) Minimax Regret The expected value (EMV) b. What is the Expected Value of Perfect Information (EVPI)
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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Western Plastic Surgery Associates is planning on opening a cosmetic plastic surgery center in Honolulu, San Francisco, or Seattle. There is a 60 percent chance that the demand for plastic surgery in the US will increase in the near future, a 25 percent chance that the number will remain the same, and a 15 percent chance that the number will decrease. The developer estimates that the following profits would result from the decision given each set of economic conditions.
|
Location |
Increase (0.60) |
Same (0.25) |
Decrease (0.15) |
|
Honolulu San Francisco Seattle |
$1,102,000 $720,000 $800,000 |
$856,000 $640,000 $702,000 |
$502,000 $602,000 $220,000 |
a. Find the best decision using the following criteria:
- Maximax
- Maximin
- Laplace (Equal Likelihood)
- Minimax Regret
- The expected value (EMV)
b. What is the Expected Value of Perfect Information (EVPI)
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