Operations Management: Processes And Supply Chains (12th Edition) (what's New In Operations Management)
Operations Management: Processes And Supply Chains (12th Edition) (what's New In Operations Management)
12th Edition
ISBN: 9780134742205
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter A, Problem 20P
Summary Introduction

Interpretation: A decision tree for the three options described in problem 19 needs to be drawn. The management’s decision in order to achieve the highest expected payoff needs to be found out.

Concept Introduction: The measure of likelihood that an event will happen, in a random experiment is called probability.

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Define the goal of decision analysis and how different decision makers may approach risk in their terms of assessment utility.
Leisure Corporation’s decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars: Profits Long-Run Demand   Low Medium High Small Plant 150 200 200 Large Plant 50 200 500   If Leisure Corporation has an extremely pessimistic outlook on demand, would it build a small or a large plant?  If Leisure Corporation wanted to minimize the maximum opportunity losses (regrets), would it build a small or a large plant?
draw the decision tree
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