EJ has plans to open some pizza restaurants, but he is not sure how many to open. He has prepared a payoff table to help analyze the situation.ALTERNATIVEHIGH DEMAND LOW DEMANDOpen 2 400,000-250,000Open 150,000-20,000Do Nothing00EJ decided to use the criterion of realism in his analysis. For what range of value of α will EJ decide to do nothing? to open 1 restaurant? to open 2 restaurants?

The Criterion of Realism decision rule attempts to find the balance between total risk aversion and…

Answered: EJ has plans to open some pizza…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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EJ has plans to open some pizza restaurants, but he is not sure how many to open. He has prepared a payoff table to help analyze the situation.

ALTERNATIVE	HIGH DEMAND	LOW DEMAND
Open 2	400,000	-250,000
Open 1	50,000	-20,000
Do Nothing	0	0

EJ decided to use the criterion of realism in his analysis. For what range of value of α will EJ decide to do nothing? to open 1 restaurant? to open 2 restaurants?

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