Myrtle Air Express decided to offer direct servide from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller-capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based on three possible levels of demand for service to Myrtle Beach: strong, medium and weak. The following table shows the estimated quarterly profits (in thousands of dollars): Demand for Service Service Strong Medium Weak Full Price 950 600 -400 Discount 750 450 300 Probability 0.4 0.3 0.3 Suppose that management of Myrtle Air Express has developed the following utility function: U(950) = 100, U(750) = 89, U(600) = 72, U(450) = 58, U(300) = 48, and U(-400) = 0. Use the expected utility approach to determine the optimal decision. What is the expected utility of the optimal choice? (Round to one decimal place.)
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
Myrtle Air Express decided to offer direct servide from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller-capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers.
Management developed estimates of the contribution to profit for each type of service based on three possible levels of demand for service to Myrtle Beach: strong, medium and weak.
The following table shows the estimated quarterly profits (in thousands of dollars):
| Demand for Service | |||
| Service | Strong | Medium | Weak |
| Full Price | 950 | 600 | -400 |
| Discount | 750 | 450 | 300 |
| Probability | 0.4 | 0.3 | 0.3 |
Suppose that management of Myrtle Air Express has developed the following utility
U(950) = 100, U(750) = 89, U(600) = 72, U(450) = 58, U(300) = 48, and U(-400) = 0.
Use the expected utility approach to determine the optimal decision.
What is the expected utility of the optimal choice? (Round to one decimal place.)
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