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a. Use the maximax criterion to determine which decision alternative to select. b. Use the maximin criterion to determine which decision alternative to select. c. Use the minimax regret criterion to determine which decision alternative to select.

a. Use the maximax criterion to determine which decision alternative to select. b. Use the maximin criterion to determine which decision alternative to select. c. Use the minimax regret criterion to determine which decision alternative to select.

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 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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19-6. Given the following decision table: States of Nature S₁ S₂ S3 Alternatives A₁ 170 45 -60 100 A₂ 30 190 175 -65 A3 145 -50 120 110 A4 -40 80 10 70 a. Use the maximax criterion to determine which decision alternative to select. b. Use the maximin criterion to determine which decision alternative to select. c. Use the minimax regret criterion to determine which decision alternative to select. 19-7. The probabilities assessed with the states of nature in the previous problem are P(S₁) = 0.1, P(S₂) = 0.2, P(S3) = 0.4, P(S) = 0.3 Using these probabilities, determine which alterna- tive to select using the expected-value criterion. Business Applications 19-8. Larry Jacava is considering producing a novelty item for golfers that will be sold through pro shops. Larry has decided on a selling price of $3.50 for the item. The item's variable cost of production is $2.00 per unit, with fixed costs of $3,750. Larry has marketed his product to local pro shops and believes the demand for the item will be either 2,000 units, 3,000 units, 4,000 units, or 5,000 units. a. Set up the payoff table for Larry's decision. b. Determine the number of units that Larry should produce using each of the following criteria: 1. maximax criterion 2. maximin criterion 3. minimax regret criterion 19-9. Sal De Carlo is the manager for food sales for Coyote Stadium. For each home game, Sal must decide how many hot dogs to have available for sale. The number of hot dogs sold depends on the game's attendance. Sal pays $0.75 for each hot dog and $0.15 for each hot dog bun. Hot dogs are sold to fans during the game for $1.75. Any leftover hot S4
Transcribed Image Text:19-6. Given the following decision table: States of Nature S₁ S₂ S3 Alternatives A₁ 170 45 -60 100 A₂ 30 190 175 -65 A3 145 -50 120 110 A4 -40 80 10 70 a. Use the maximax criterion to determine which decision alternative to select. b. Use the maximin criterion to determine which decision alternative to select. c. Use the minimax regret criterion to determine which decision alternative to select. 19-7. The probabilities assessed with the states of nature in the previous problem are P(S₁) = 0.1, P(S₂) = 0.2, P(S3) = 0.4, P(S) = 0.3 Using these probabilities, determine which alterna- tive to select using the expected-value criterion. Business Applications 19-8. Larry Jacava is considering producing a novelty item for golfers that will be sold through pro shops. Larry has decided on a selling price of $3.50 for the item. The item's variable cost of production is $2.00 per unit, with fixed costs of $3,750. Larry has marketed his product to local pro shops and believes the demand for the item will be either 2,000 units, 3,000 units, 4,000 units, or 5,000 units. a. Set up the payoff table for Larry's decision. b. Determine the number of units that Larry should produce using each of the following criteria: 1. maximax criterion 2. maximin criterion 3. minimax regret criterion 19-9. Sal De Carlo is the manager for food sales for Coyote Stadium. For each home game, Sal must decide how many hot dogs to have available for sale. The number of hot dogs sold depends on the game's attendance. Sal pays $0.75 for each hot dog and $0.15 for each hot dog bun. Hot dogs are sold to fans during the game for $1.75. Any leftover hot S4
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