A property development company is planning to build a block of student apartments in Lusaka’s Mass Media area. The company is yet to decide what size of block to build: a small, medium, or large. The payoffs of each size will depend on the demand for student accommodation in the area, which could be low, medium, high. The Developer estimates a 25%, 35%, and 40% chance of low, medium, and high demand, respectively.Below is a payoffs matrix (in K’000) showing the annual payoffs for the decision problem.Size of BlockMarket DemandLowMediumHighSmall400400400Medium200500500Large-400300800Required:Identify the decision alternatives and uncertain conditions surrounding them?What is the optimal decision if the Developer is conservative?What is the optimal decision if the Developer is a risk taker?What is the optimal decision if the Developer wishes to minimize the Expected Opportunity Loss on the decision to be taken?

Name: A property development company is planning to build a block of student
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Description: A property development company is planning to build a block of student apartments in Lusaka’s Mass Media area. The company is yet to decide what size of block to build: a small, medium, or large. The payoffs of each size will depend on the demand for

Decision making is the process of selecting from a set of two or more choices, which one is to be…

Business

Operations Management

Identify the decision alternatives and uncertain conditions surrounding them? What is the optimal decision if the Developer is conservative? What is the optimal decision if the Developer is a risk taker? What is the optimal decision if the Developer wishes to minimize the Expected Opportunity Loss on the decision to be taken?

Identify the decision alternatives and uncertain conditions surrounding them? What is the optimal decision if the Developer is conservative? What is the optimal decision if the Developer is a risk taker? What is the optimal decision if the Developer wishes to minimize the Expected Opportunity Loss on the decision to be taken?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 31P

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