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Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Question
Answer A.2 a-e
a-c is in the picture here is d and e
d) What is the qually likely decision?
e) Develop a decision tree. Assume each outcome is equally likely, then find the highest EMV.

Transcribed Image Text:...A.2 Even though independent gasoline stations have been
having a difficult time, Ian Langella has been thinking about
starting his own independent gasoline station. Ian's problem is to
decide how large his station should be. The annual returns will
depend on both the size of his station and a number of marketing
factors related to the oil industry and demand for gasoline. After
a careful analysis, Ian developed the following table:
SIZE OF FIRST
STATION
Small
Medium
Large
Very large
GOOD
MARKET
$ 50,000
$ 80,000
$100,000
$300,000
FAIR
MARKET
$20,000
$30,000
$30,000
$25,000
POOR
MARKET
-$ 10,000
-$20,000
-$ 40,000
-$160,000
For example, if Ian constructs a small station and the market is
good, he will realize a profit of $50,000.
a) Develop a decision table for this decision, like the one illus-
trated in Table A.2.
b) What is the maximax decision?
c) What is the maximin decision?
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- 3. You are a marketing manager for a food products company, considering the introduction of a new brand of organic salad dressings. You need to develop a marketing plan for the salad dressings in which you must decide whether you will have a gradual introduction of the salad dressings (with only a few different salad dressings introduced to the market) or a concentrated introduction of the salad dressings (in which a full line of salad dressings will be introduced to the market). You estimate that if there is a low demand for the salad dressings, your first year’s profit will be $1 million for a gradual introduction and million (a loss of $5 million) for a concentrated introduction. If there is high demand, you estimate that your first year’s profit will be $4 million for a gradual introduction and $10 million for a concentrated introduction. The payoff table for the organic salad dressings marketing is given as follows: Low Demand High Demand Gradual 1…arrow_forwardRefer to the research analysis output below. Which is NOT a reasonable interpretation of this output? 1. The median Growth from treatment to treatment for this research is significantly different. 2. This is a non-parametric research analysis 3. The original data are most likely non-normal 4. There are most likely outliers in the data 5. The research analysis conducted is the Kruskal -Wallis testarrow_forward3arrow_forward
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