Factory Location 22 A manufacturer of electrical machinery is located in a cramped, though low-rent, factory close to the center of a large city. The firm needs to expand, and it could do so in one of three ways: (1) Remain where it is and install new equipment, (2) move to a suburban site near the same city, or (3) relocate in a different part of the country where labor is cheaper. Its decision will be influenced by the fact that one of the following will happen: (I) The government may introduce a program of equipment grants, (II) a new suburban highway may be built, or (III) the government may institute a policy of financial help to companies who move into regions of high unemployment. The value to the company of each combination is given in the following table: Government’s Options Manufacturer’s Options I II III 1 200 150 140 2 130 220 130 3 110 110 220 If the manufacturer judges that there is a 20% probability that the government will go with option I, a 50% probability that it will go with option II, and a 30% probability that it will go with option III, what is the manufacturer’s best option?
Factory Location 22 A manufacturer of electrical machinery is located in a cramped, though low-rent, factory close to the center of a large city. The firm needs to expand, and it could do so in one of three ways: (1) Remain where it is and install new equipment, (2) move to a suburban site near the same city, or (3) relocate in a different part of the country where labor is cheaper. Its decision will be influenced by the fact that one of the following will happen: (I) The government may introduce a program of equipment grants, (II) a new suburban highway may be built, or (III) the government may institute a policy of financial help to companies who move into regions of high unemployment. The value to the company of each combination is given in the following table: Government’s Options Manufacturer’s Options I II III 1 200 150 140 2 130 220 130 3 110 110 220 If the manufacturer judges that there is a 20% probability that the government will go with option I, a 50% probability that it will go with option II, and a 30% probability that it will go with option III, what is the manufacturer’s best option?
Solution Summary: The author calculates the manufacture's best option if there are three options and there is a 20% chance of choosing option I, 50% chance to choose option II, and 30% chance for government.
Factory Location22 A manufacturer of electrical machinery is located in a cramped, though low-rent, factory close to the center of a large city. The firm needs to expand, and it could do so in one of three ways: (1) Remain where it is and install new equipment, (2) move to a suburban site near the same city, or (3) relocate in a different part of the country where labor is cheaper. Its decision will be influenced by the fact that one of the following will happen: (I) The government may introduce a program of equipment grants, (II) a new suburban highway may be built, or (III) the government may institute a policy of financial help to companies who move into regions of high unemployment. The value to the company of each combination is given in the following table:
Government’s Options
Manufacturer’s Options
I
II
III
1
200
150
140
2
130
220
130
3
110
110
220
If the manufacturer judges that there is a 20% probability that the government will go with option I, a 50% probability that it will go with option II, and a 30% probability that it will go with option III, what is the manufacturer’s best option?
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, subject and related others by exploring similar questions and additional content below.
Solve ANY Optimization Problem in 5 Steps w/ Examples. What are they and How do you solve them?; Author: Ace Tutors;https://www.youtube.com/watch?v=BfOSKc_sncg;License: Standard YouTube License, CC-BY
Types of solution in LPP|Basic|Multiple solution|Unbounded|Infeasible|GTU|Special case of LP problem; Author: Mechanical Engineering Management;https://www.youtube.com/watch?v=F-D2WICq8Sk;License: Standard YouTube License, CC-BY