Ralph Dodd, a concessionaire for the local ballpark, has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of the crowd). LARGE AVERAGE SMALL PROBABILITY .3 .5 .2 ALTERNATIVE 1 9,000 12,000 -2,000 ALTERNATIVE 2 22,000 6,000 6,000 ALTERNATIVE 3 15,000 12,000 5,000 The probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd. a) The opportunity cost for choosing Alternative 2 in the presence of a large crowd is: b) The minimum expected opportunity loss is: c) The maximum amount of money that Ralph should be willing to pay for the perfect information is:
Ralph Dodd, a concessionaire for the local ballpark, has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of the crowd). LARGE AVERAGE SMALL PROBABILITY .3 .5 .2 ALTERNATIVE 1 9,000 12,000 -2,000 ALTERNATIVE 2 22,000 6,000 6,000 ALTERNATIVE 3 15,000 12,000 5,000 The probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd. a) The opportunity cost for choosing Alternative 2 in the presence of a large crowd is: b) The minimum expected opportunity loss is: c) The maximum amount of money that Ralph should be willing to pay for the perfect information is:
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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Ralph Dodd, a concessionaire for the local ballpark, has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of the crowd).
LARGE | AVERAGE | SMALL | |
PROBABILITY | .3 | .5 | .2 |
ALTERNATIVE 1 | 9,000 | 12,000 | -2,000 |
ALTERNATIVE 2 | 22,000 | 6,000 | 6,000 |
ALTERNATIVE 3 | 15,000 | 12,000 | 5,000 |
The probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd.
a) The opportunity cost for choosing Alternative 2 in the presence of a large crowd is:
b) The minimum expected opportunity loss is:
c) The maximum amount of money that Ralph should be willing to pay for the perfect information is:
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