You are given the following payoff table (in K million), about a cooking oil producer in Lusaka. The company is researching for its 2019 budget production levels. High Demand Average Demand Low Demand Produce 30,000 39 5 -13 Produce 20,000 28 12 9 Produce 12,000 13 4 -10 Probability ? 0.5 0.2 Required: a) Explain the meaning of 39 and -10 in the payoff table. b) What are the expected payoffs for each production level? (Note that you will have to determine the missing probability). c) What is the expected payoff under perfect information? d) How much should the company invest in further market research to obtain perfect information
You are given the following payoff table (in K million), about a cooking oil producer in Lusaka. The company is researching for its 2019 budget production levels. High Demand Average Demand Low Demand Produce 30,000 39 5 -13 Produce 20,000 28 12 9 Produce 12,000 13 4 -10 Probability ? 0.5 0.2 Required: a) Explain the meaning of 39 and -10 in the payoff table. b) What are the expected payoffs for each production level? (Note that you will have to determine the missing probability). c) What is the expected payoff under perfect information? d) How much should the company invest in further market research to obtain perfect information
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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You are given the following payoff table (in K million), about a cooking oil producer in Lusaka. The company is researching for its 2019 budget production levels.
|
|
|
|
|
|
|
High Demand |
Average Demand |
Low Demand |
|
Produce 30,000 |
39 |
5 |
-13 |
|
Produce 20,000 |
28 |
12 |
9 |
|
Produce 12,000 |
13 |
4 |
-10 |
|
Probability |
? |
0.5 |
0.2 |
Required:
a) Explain the meaning of 39 and -10 in the payoff table.
b) What are the expected payoffs for each production level? (Note that you will have to determine the missing probability).
c) What is the expected payoff under perfect information?
d) How much should the company invest in further market research to obtain perfect information
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