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TUTORIAL I DECISION ANALYSIS 1. Even though independent gasoline stations have been having a difficult time, Susan Solomon has been thinking about starting her own independent gasoline station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table: Size of First Station Small Medium Large Extra Large Good Market (5) Stock Market 50,000 80,000 Bonds CDs 100,000 Probability 300,000 Decision Alternative Fair Market (S) 20,000 30,000 30,000 25,000 For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000. e) what is the criterion of realism decision? Use an a value of 0.8. 0 Develop an opportunity loss table? B) What is the minimax regret decision? 2. Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profit s that would be realized during the next year for each of three investment alternatives Mickey is considering: Good Economy 80,000 30,000 Poor Market (S) 23,000 -10,000 -20,000 0.5 -40,000 -160,000 State of Nature Poor Economy -20,000 20,000 23,000 0.5

TUTORIAL I DECISION ANALYSIS 1. Even though independent gasoline stations have been having a difficult time, Susan Solomon has been thinking about starting her own independent gasoline station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table: Size of First Station Small Medium Large Extra Large Good Market (5) Stock Market 50,000 80,000 Bonds CDs 100,000 Probability 300,000 Decision Alternative Fair Market (S) 20,000 30,000 30,000 25,000 For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000. e) what is the criterion of realism decision? Use an a value of 0.8. 0 Develop an opportunity loss table? B) What is the minimax regret decision? 2. Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profit s that would be realized during the next year for each of three investment alternatives Mickey is considering: Good Economy 80,000 30,000 Poor Market (S) 23,000 -10,000 -20,000 0.5 -40,000 -160,000 State of Nature Poor Economy -20,000 20,000 23,000 0.5

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...
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TUTORIAL DECISION ANALYSIS 1. e) 0 B) 2. Even though independent gasoline stations have been having a difficult time, Susan Solomon has been thinking about starting her own independent gasoline station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table: Size of First Station Small Medium Large Extra Large Stock Market Bonds CDs Good Market (5) Probability a) b) 50,000 80,000 Decision Alternative. 100,000 300,000 Fair Market (S) 20,000 30,000 30,000 25,000 For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000. what is the criterion of realism decision? Use an a value of 0.8. Develop an opportunity loss table? What is the minimax regret decision? Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profit s that would be realized during the next year for each of three investment alternatives Mickey is considering: Good Economy 80,000 30,000 23,000 Poor Market (5) 0.5 -10,000 State of Nature -20,000 -40,000 -160,000 Poor Economy -20,000 20,000 23,000 0.5 What decision would maximize expected profits? What is the maximum amount that should be paid for a perfect forecast of the economy?
Transcribed Image Text:TUTORIAL DECISION ANALYSIS 1. e) 0 B) 2. Even though independent gasoline stations have been having a difficult time, Susan Solomon has been thinking about starting her own independent gasoline station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table: Size of First Station Small Medium Large Extra Large Stock Market Bonds CDs Good Market (5) Probability a) b) 50,000 80,000 Decision Alternative. 100,000 300,000 Fair Market (S) 20,000 30,000 30,000 25,000 For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000. what is the criterion of realism decision? Use an a value of 0.8. Develop an opportunity loss table? What is the minimax regret decision? Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profit s that would be realized during the next year for each of three investment alternatives Mickey is considering: Good Economy 80,000 30,000 23,000 Poor Market (5) 0.5 -10,000 State of Nature -20,000 -40,000 -160,000 Poor Economy -20,000 20,000 23,000 0.5 What decision would maximize expected profits? What is the maximum amount that should be paid for a perfect forecast of the economy?
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