Spreadsheet Modeling & Decision Analysis: A Practical Introduction To Business Analytics, Loose-leaf Version
8th Edition
ISBN: 9781337274852
Author: Ragsdale, Cliff
Publisher: South-Western College Pub
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Robert Ragsdale is trying to decide if he should purchase repair and replacement insurance on a new laptop computer that he is planning to purchase. The policy costs $400.00 at the time of purchase, and over the next three years will replace the laptop if it is stolen or repair it if it is broken. The following table contains the total costs of this decision.
Which alternative is best, according to each of the following
decision criteria?
Maximin
Maximax
Laplace
Minimax regret
A soft drink company is considering launching a ‘seasonal soda’ that will be sold for a limited duration. They are considering selling the new soda X-Mist during
the upcoming summer season. The company believes, based on its limited market analysis,
that there is a 0.75 probability that X-Mist will have a successful summer season and have estimated that they will receive a profit of $4 million if it is successful. If X-Mist is not
successful over the summer season, the company will incur a loss of $900,000.
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i.e., a soda that will be successful in the market will be reported as ‘Successful’ by Market-Strategies with a probability 0.9 and a soda that will not be successful in the market will be reported as ‘Fail’ by Market-Strategies with a probability of 0.9.
The soft drink company must decide…
Kroft Food Products is attempting to decide whether it should introduce a new line of salad
dressings called Special Choices. The company can test market the salad dressings in selected
geographic areas or bypass the test market and introduce the product nationally. The cost of the
test market is $150,000. If the company conducts the test market, it must wait to see the results
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test market result is estimated to be 0.6. Alternatively, the company can decide not to conduct
the test market and go ahead and make the decision to introduce the dressings or not. If the salad
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