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Here are the changes to the original problem and the revised conditions for this decision-making problem: With a favorable market, John Thompson thinks a large facility would result in a net profit of $195,000 to his firm. If the market is unfavorable, the construction of a large facility would result in $185,000 net loss. A small plant would result in a net profit of $110,000 in a favorable market, but a net loss of $25,000 would occur if the market was unfavorable. Doing nothing would result in $0 profit in either market conditions. a) Create a decision table, like the one presented on Table 3.1 (page #65). b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the guidance from your textbook and create a table similar to Table 3.2 (page #66). c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the guidance from your textbook and create a table similar to Table 3.3 (page #66).

Here are the changes to the original problem and the revised conditions for this decision-making problem: With a favorable market, John Thompson thinks a large facility would result in a net profit of $195,000 to his firm. If the market is unfavorable, the construction of a large facility would result in $185,000 net loss. A small plant would result in a net profit of $110,000 in a favorable market, but a net loss of $25,000 would occur if the market was unfavorable. Doing nothing would result in $0 profit in either market conditions. a) Create a decision table, like the one presented on Table 3.1 (page #65). b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the guidance from your textbook and create a table similar to Table 3.2 (page #66). c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the guidance from your textbook and create a table similar to Table 3.3 (page #66).

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 36P
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Problem #1 - - Chapter 3 - Decision Making - MODIFIED Thompson Lumber Company example presented on pages 64 - 70. Here are the changes to the original problem and the revised conditions for this decision-making problem: With a favorable market, John Thompson thinks a large facility would result in a net profit of $195,000 to his firm. If the market is unfavorable, the construction of a large facility would result in $185,000 net loss. A small plant would result in a net profit of $110,000 in a favorable market, but a net loss of $25,000 would occur if the market was unfavorable. Doing nothing would result in $0 profit in either market conditions. a) Create a decision table, like the one presented on Table 3.1 (page #65). b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the guidance from your textbook and create a table similar to Table 3.2 (page #66). c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the guidance from your textbook and create a table similar to Table 3.3 (page #66). d) What is your recommendation if you would apply the Criterion of Realism (Hurwicz Criterion) with a coefficient of realism a = 0.75. Follow the guidance from your textbook and create a table similar to Table 3.4 (page #67). e) What is your recommendation if you would apply the Equally Likely criterion (Laplace)? Follow the steps from your textbook and create a table similar to Table 3.5. f) What is your recommendation if would apply the Minimax Regret criterion. Follow the guidance from your textbook and create 3 tables similar to Tables 3.6, 3.7 and 3.8 (pages 68-69). g) What is your recommendation if you would apply the Expected Monetary Value, assuming that the probability of a favorable market is 60% and the probability of an unfavorable market is 40%. Follow the guidance from your textbook and create a table similar to Table 3.9 (page 70). Page 1 of 4
Transcribed Image Text:Problem #1 - - Chapter 3 - Decision Making - MODIFIED Thompson Lumber Company example presented on pages 64 - 70. Here are the changes to the original problem and the revised conditions for this decision-making problem: With a favorable market, John Thompson thinks a large facility would result in a net profit of $195,000 to his firm. If the market is unfavorable, the construction of a large facility would result in $185,000 net loss. A small plant would result in a net profit of $110,000 in a favorable market, but a net loss of $25,000 would occur if the market was unfavorable. Doing nothing would result in $0 profit in either market conditions. a) Create a decision table, like the one presented on Table 3.1 (page #65). b) What is your recommendation if you would apply the Maximax criterion (Optimistic)? Follow the guidance from your textbook and create a table similar to Table 3.2 (page #66). c) What is your recommendation if you would apply the Maximin Criterion (Pessimistic)? Follow the guidance from your textbook and create a table similar to Table 3.3 (page #66). d) What is your recommendation if you would apply the Criterion of Realism (Hurwicz Criterion) with a coefficient of realism a = 0.75. Follow the guidance from your textbook and create a table similar to Table 3.4 (page #67). e) What is your recommendation if you would apply the Equally Likely criterion (Laplace)? Follow the steps from your textbook and create a table similar to Table 3.5. f) What is your recommendation if would apply the Minimax Regret criterion. Follow the guidance from your textbook and create 3 tables similar to Tables 3.6, 3.7 and 3.8 (pages 68-69). g) What is your recommendation if you would apply the Expected Monetary Value, assuming that the probability of a favorable market is 60% and the probability of an unfavorable market is 40%. Follow the guidance from your textbook and create a table similar to Table 3.9 (page 70). Page 1 of 4
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