Find the Given Payoff table and use Minimax regret to evaluate best decisions.DemandModerate222721DecisionSmall WarehouseMedium-1WarehouseLarge Warehouse -5Medium WarehouseData inadequateSmall WarehouseLow24Large WarehouseHigh233339

Decision-making is the process of selecting a course of action from among several possible options…

Answered: Find the Given Payoff table and use…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 67P

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Maximax, Maximin, Minimax RegretLearning material: Watch this videoLab Scenario:Imagine a local entrepreneur is considering starting a business and has three options: open a coffeeshop, a bookshop, or a fusion coffee-bookshop. The entrepreneur is uncertain about the market'sreaction to these businesses. The possible market conditions are: favorable, neutral, and unfavorable.Data (Payoff Table in USD):Business Option Favorable Market Neutral Market Unfavorable MarketCoffee Shop 150,000 70,000 -30,000Bookshop 100,000 60,000 -20,000Fusion Shop 130,000 80,000 -10,000Positive values represent profits, and negative values represent losses.Assignment Steps:1. Maximax (Optimist's Criterion) Approach:For each business option, identify the maximum possible payoff.First Question What is the business option with the highest of these maximum payoffs? (5points)2. Maximin (Pessimist's Criterion) Approach:For each business option, identify the minimum possible payoff.Second Question What is the…
Discuss the Thaler wine problem with your group, and summarize the discussion and any conclusions in a few sentences here. “Suppose you bought a case of a good 1982 Bordeaux for $20 a bottle. The wine now sells at auction for about $75 a bottle. You have decided to drink a bottle. Which of the following best captures your feeling of the cost to you of drinking this bottle?” (Thaler, 1999) $0 $20 $20 plus interest $75 -$55 (negative $55 cost) Or something else?
Using the following table, perform ALL FIVE of the techniques for Decision Making under Uncertainty: Maximax, Maximin, Hurwicz Realism (α = 0.7), LaPlace and Minimax Regret. Use the .50 for the probability of a Good Economy and .50 for the probability of a Poor Economy. You must show your work for obtaining the points. STATE OF NATURE DECISION ALTERNATIVE GOOD ECONOMY POOR ECONOMY Sotck market 80,000 -20,000 Bonds 30,000 20,000 CDs 23,000 23,000
Using the following table, perform ALL FIVE of the techniques for Decision Making under Uncertainty: Maximax, Maximin, Hurwicz Realism (α = 0.7), LaPlace and Minimax Regret. Use the .50 for the probability of a Good Economy and .50 for the probability of a Poor Economy. You must show your work. STATE OF NATURE DECISION ALTERNATIVE GOOD ECONOMY POOR ECONOMY Sotck market 80,000 -20,000 Bonds 30,000 20,000 CDs 23,000 23,000
Note: Enter your answer in dollars, not in millions. Round your answer to the nearest whole dollar amount. I put the 1,220,000 and it said that it was wrong
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (U) condition. The relevant conditional probabilities are as follows: P(F|S1)=0.10 P (U|S1)=0.90 P(F|S2)=0.40 P (U|S2)=0.60 P(F|S3)=0.60 P (U|S3)=0.40 Decision tree leading to market study/ prediction of favorable…
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (U) condition. The relevant conditional probabilities are as follows: P(F|S1)=0.10 P (U|S1)=0.90 P(F|S2)=0.40 P (U|S2)=0.60 P(F|S3)=0.60 P (U|S3)=0.40 A.Compute the probabilities by completing the table Sate of…
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (U) condition. The relevant conditional probabilities are as follows: P(F|S1)=0.10 P (U|S1)=0.90 P(F|S2)=0.40 P (U|S2)=0.60 P(F|S3)=0.60 P (U|S3)=0.40 Compute the probabilities by completing the table Sate of…
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a.Use expected value to recommend a decision. b.Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand.
Company X produces a product, GlueX3, that Company X sales for $5. An opportunity presents itself to reallocate its manufacturing facility and related resources to produce Epoxy10. It believes it can sell Epoxy10 for $8. Explain how this switch creates “value”. Be sure to include for whom.
Suppose the equilibrium price for good quality used cars is $20,000. And the equilibrium price for poor quality used cars is $10,000. Assume a potential used car buyer has imperfect information as to the condition of any given used car. Assume this potential buyer believes the probability a given used car is good quality is .60 and the probability a given used car is low quality is .40. Assume the seller has perfect information on all cars in inventory. What policy or mechanism could solve any informational imbalances and restore the market to an efficient allocation of used cars? a. Third-party provided information on the history of the car (ex: maintenance records, accident records, verified millage and verify repairs). b. Legal remedies and laws restricting fraudulent sales of used cars. c. Obtainablepublications discussing quality, price and possible repairs of all cars --used and new. d. All of the above.
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): State of Nature Low Demand Medium Demand High Demand Decision Alternative s1 s2 s3 Manufacture, d1 -20 40 100 Purchase, d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. Use a decision tree to recommend a decision.Recommended decision: Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. EVPI: $ fill in the blank 3 A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows: P(F | s1) = 0.10 P(U | s1) = 0.90 P(F | s2) = 0.40 P(U |…

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Find the Given Payoff table and use Minimax regret to evaluate best decisions. Demand Low Moderate 24 22 -1 27 -5 21 Decision Small Warehouse Medium Warehouse Large Warehouse High 23 33 39