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Actions Events ΕΙ E2 E3 E4 ΑΙ 8 0 -10 6 A2 -4 12 18 -2 A3 14 6 0 8 Find the best action under each of the 5 decision criteria. a. Expected Monetary Value b. Expected Opportunity Loss c. Maximax d. Maximin e. Minimax Regret Rule

Actions Events ΕΙ E2 E3 E4 ΑΙ 8 0 -10 6 A2 -4 12 18 -2 A3 14 6 0 8 Find the best action under each of the 5 decision criteria. a. Expected Monetary Value b. Expected Opportunity Loss c. Maximax d. Maximin e. Minimax Regret Rule

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter20: The Problem Of Adverse Selection Moral Hazard
Section: Chapter Questions
Problem 3MC
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Actions Events E1 E2 E3 E4 A1 8 -10 6. A2 -4 12 18 -2 АЗ 14 8 Find the best action under each of the 5 decision criteria. a. Expected Monetary Value b. Expected Opportunity Loss с. Маximax d. Maximin e. Minimax Regret Rule 1.
Transcribed Image Text:Actions Events E1 E2 E3 E4 A1 8 -10 6. A2 -4 12 18 -2 АЗ 14 8 Find the best action under each of the 5 decision criteria. a. Expected Monetary Value b. Expected Opportunity Loss с. Маximax d. Maximin e. Minimax Regret Rule 1.
2. Zahra and Adrian and run a small Stationery shop called "A to Z Stationery". They must order copies for the coming week. Orders for the copies must be placed in quantities of 20. They can order 20, 40, 60 or 80 copies. The cost per copy is &70 and the copies will be sold for 6100 each. Any copy left over at the end of the week can be sold (for certain) at 645 each. If Zahra and Adrian run out of copies during the season, then they will suffer a loss of "goodwill" among their customers. They estimate this goodwill loss to be 5 per customer who was unable to buy a copy. Zahra and Adrian estimate that the demand for copies the coming week will be 10, 30, 50, or 70 copies with probabilities of 0.2, 0.4, 0.3, and 0.1 respectively.
Transcribed Image Text:2. Zahra and Adrian and run a small Stationery shop called "A to Z Stationery". They must order copies for the coming week. Orders for the copies must be placed in quantities of 20. They can order 20, 40, 60 or 80 copies. The cost per copy is &70 and the copies will be sold for 6100 each. Any copy left over at the end of the week can be sold (for certain) at 645 each. If Zahra and Adrian run out of copies during the season, then they will suffer a loss of "goodwill" among their customers. They estimate this goodwill loss to be 5 per customer who was unable to buy a copy. Zahra and Adrian estimate that the demand for copies the coming week will be 10, 30, 50, or 70 copies with probabilities of 0.2, 0.4, 0.3, and 0.1 respectively.
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