OPERATIONS MANAGEMENT CUSTOM ACCESS
11th Edition
ISBN: 9780135622438
Author: KRAJEWSKI
Publisher: PEARSON EDUCATION (COLLEGE)
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Chapter A, Problem 21P
Summary Introduction
Interpretation: The owner of P Automotive Dealers is trying to decide whether to expand his current facility. If he expands and customer demand turns weak, there is a chance he could lease part of his newly constructed facility to another dealer. If he doesn’t expand and strong demand occurs, he could attempt to lease another facility across town. The decision tree shown in Figure A8 needs to be analyzed and the best set of decisions and expected payoffs needs to be determined.
Figure A.8
Concept Introduction: The measure of likelihood that an event will happen, in a random experiment is called probability.
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The following payoff table provides profits based on various possible decision alternatives adn various levels of demand at Robert Klassan's print shop:
decision low high
alt 1 $10,000 $36,000
alt 2 $6,000 $38,000
alt 3 -$2500 $52,000
The probability of low demand is 0.40 whereas the probability of high demand is 0.60.
a) The alternative that provides Robert the greatest expected monetary value is _________
The EMV for this decision is $_______
b) The expected value with perfect information (EVwPI)= $______
c) The expected value of perfect information (EVPI) for Robert= $________
A payoff table is given as:
S1
S2
S3
D1
250
750
500
D2
300
-250
1200
D3
500
500
600
(a) What choice should be made by the optimistic decision maker?
(b) What choice should be made by the conservative decision maker?
(c) What decision should be made under minimal regret?
(d) If the probabilities of d1, d2, and d3 are .2, .5, and .3, respectively, then what choice should be made under expected value?
The following payoff table provides profits based on various possible decision alternatives and various levels of demand.
ALTERNATIVE
DEMAND
LOW
MEDIUM
HIGH
Alternative 1
40
80
150
Alternative 2
80
120
130
Alternative 3
100
100
100
a. Which alternative should be chosen using the equally likely decision criterion?
b. Set-up the opportunity loss table.
c. Which alternative should be chosen using the minimax regret criterion?
Chapter A Solutions
OPERATIONS MANAGEMENT CUSTOM ACCESS
Ch. A - Mary Williams, owner of Williams Products, is...Ch. A - Prob. 2PCh. A - An interactive television service that costs $10...Ch. A - A restaurant is considering adding fresh brook...Ch. A - Spartan Castings must implement a manufacturing...Ch. A - A news clipping service is considering...Ch. A - Prob. 7PCh. A - Techno Corporation is currently manufacturing an...Ch. A - The Tri-County Generation and Transmission...Ch. A - Prob. 10P
Ch. A - Tri-County G&T sells 150,000 MWh per year of...Ch. A - The Forsite Company is screening three ideas for...Ch. A - Prob. 13PCh. A - Prob. 14PCh. A - Janice Gould of Krebs Consulting is in the process...Ch. A - Build-Rite Construction has received favorable...Ch. A - Prob. 17PCh. A - Prob. 18PCh. A - Prob. 20PCh. A - Prob. 21PCh. A - Prob. 22PCh. A - Prob. 24P
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