Practical Management Science
Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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JayZee Electronics wanted to expand its operations by considering of putting up another warehouse to
store their electronic supplies from different suppliers. The table below shows the payoff for all
alternatives available for JayZee Electronics in all 3 states of nature. The probabilities for every state of
nature is also provided.
Size of the Warehouse
Good Market ($)
Fair Market ($)
Poor Market ($)
Small
40,000
-10,000
-20,000
18,000
Medium
80,000
90,000
Large
Very Large
-40,000
-160,000
100,000
175,000
350,000
25,000
Probabilities
0.35
0.45
0.20
Using Decision Making under Uncertainty (Use Sheet 1 and rename it to Lastname_Uncertainty)
(a) Develop a decision table for this decision.
(b) What is the maximax decision?
(c) What is the maximin decision?
(d) What is the equally likely decision?
(e) What is the criterion of realism decision? Use an a value of 0.8.
(f) Develop an opportunity loss table.
(g) What is the minimax regret decision?
Using Decision Making under Risk (Use Sheet 1 and rename it to Lastname_Risk)
(a) What alternative will JayZee Electronics choose? How much is the payoff?
(b) Additional information is being offered by a 3rd party marketing company. The additional
information costs $100,000. Will JayZee pay such amount? Why or why not?
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Transcribed Image Text:JayZee Electronics wanted to expand its operations by considering of putting up another warehouse to store their electronic supplies from different suppliers. The table below shows the payoff for all alternatives available for JayZee Electronics in all 3 states of nature. The probabilities for every state of nature is also provided. Size of the Warehouse Good Market ($) Fair Market ($) Poor Market ($) Small 40,000 -10,000 -20,000 18,000 Medium 80,000 90,000 Large Very Large -40,000 -160,000 100,000 175,000 350,000 25,000 Probabilities 0.35 0.45 0.20 Using Decision Making under Uncertainty (Use Sheet 1 and rename it to Lastname_Uncertainty) (a) Develop a decision table for this decision. (b) What is the maximax decision? (c) What is the maximin decision? (d) What is the equally likely decision? (e) What is the criterion of realism decision? Use an a value of 0.8. (f) Develop an opportunity loss table. (g) What is the minimax regret decision? Using Decision Making under Risk (Use Sheet 1 and rename it to Lastname_Risk) (a) What alternative will JayZee Electronics choose? How much is the payoff? (b) Additional information is being offered by a 3rd party marketing company. The additional information costs $100,000. Will JayZee pay such amount? Why or why not?
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