II.+James Scott is considering the possibility of opening a small outfit shop on Sta. MariaDistrict, a few blocks from St. Green Ville College. She has located on a mall that attractsstudents. To open a small shop, medium sized shop, or no shop at all are her options.The market can be good, average, or bad. The probabilities for these three possibilitiesare 30% for good market, 50% for an average market, and 20% for bad market. Theprofit or loss for the said market conditions are given in the table below;ALTERNATIVESmall ShopMedium Sized ShopNo ShopGOOD150,000200,0000AVERAGE50,00070,0000a) Calculate the Expected Value of Perfect Information (EVPI)b) What do you recommend?BAD-80,000-120,0000

The expected value of perfect information (EVPI) is a concept used in decision theory and risk…

Answered: a) Calculate the Expected Value of…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 30P

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6. Laura is trying to decide whether to sell her knitted hats on Etsy, at a holiday bazaar, or in a local boutique. Demand could be 0 hats/month, 10 hats/month, or 20 hats/month. Given the payoff matrix below, what is her decision under equally likely? Demand = 0 Demand = 10 Demand = 20 Etsy -$70 $80 $230 Bazaar -$60 $90 $240 Boutique -$80 $70 $220 Select one: a. Etsy and boutique. b. Etsy only. c. Etsy and bazaar. d. Bazaar and boutique. e. All 3 are equally good. f. Bazaar only. g. None of them are good options. h. Boutique only.
How would you go about attempting to come upwith the probability of a “super-event” or the probability of a“unique-event?” What factors would you consider?
Exclusive Footwear Ltd experiencing profit declining in recent times... In the light of the above research, suggest a list of variables (e.g. IV, DV, or MV), develop conceptual model, and discuss their nature and potential relation to each other with proper justification. Develop relevant hypothesis for the variables.
As manager for a retail store, you have to order new stock. There are three ranges to choose from: luxury, middle of the range and inexpensive. The strategic decision on which range to buy depends on the economic outlook for the season, but the economic forecasts are uncertain. Historical data shows that the expected profits are: Profit pay- offs Economic outlook Strategies Good Average Bad 1. Buy luxury range 100,000 40,000 −80,000 2. Buy middle of range 70,750 60,000 −30,200 3. Buy inexpensive range −20,200 50,500 50,000 Figure 1Pay-off table of profits Use the Laplace criterion to make a decision. Use the Wald criterion to make a decision. Use the maximax criterion to make a decision. Use the maximin criterion to make a decision. Compare and discuss the results.
ABC company wants to open one, two, or three shops. The average Profit varies with the demand in three categories low, medium and high. Determine which one is better using Maximax, Maximin, Laplace, Minimax regret. Demand Number of Shops 1 2 3 Low 150 175 200 Medium 100 200 200 High 0 170 400
You are the marketing director for a minor league baseball team, and (not unlike a certain major league baseball team in this city) you are interested in ways to increase attendance.You think that attendance is likely driven by several factors, including how competitive the team is, the weather, and certain price promotions which are offered periodically throughout the season (e.g., ‘Buck Night’, where all parking, hot dogs and soft drinks are only $1). Based on data from several prior seasons, you estimate the following regression model for attendance: attend= 1000 + 10,000 win% + 1500 sun + 1200 sun*promo where, attend = attendance in number or patronswin% = team’s winning percentage (a measure of how competitive they are)sun = 1 if the weather is sunny, 0 elsepromo = 1 if the game offered a price promotion, 0 else. a) Draw a graph of the relationship between attendance and the team’s winning percentage, for the case when there is a price promotion on a sunny night. Also, graph…
I think it might be the second or last option but I am not sure.
Payoff Table Decision Alternatives Demand Low Medium High Small, d1 400 500 600 Medium, d2 100 600 800 Large, d3 -300 400 1200 1). If nothing is known about the demand probabilities, what are the recommended decision using the Maximax (optimistic), Maximin (pessimistic) and Equally Likely? 2). If P(low) = 0.20, P(medium) = 0.35, and P(high) = 0.45. What is the recommended decision using the expected monetary value approach? 3). What is the expected value of perfect information (EVPI)?
A well-known plastic mould and die manufacturer in Toronto intends to expand internationally in anticipation of strong demand and expansion in the plastic die manufacturing sector. use the table beneath. Using the Maximax, Maximin, and equally likely conditions, assist the business in making the best option in an unclear situation. 0.5 for a highly favourable condition, 0.2 for an average demand, and 0.3 for an unfavourable state are the probabilities linked with the states of nature.a) Choose the course of action that will give Andrew the highest predicted monetary value (EMV).b) Determine the anticipated value of perfect information (EVPI).
eferring to the pay-off table, determine which alternative would be chosen under each of these strategies: Possible future demand in OMR Alternative Low Medium High A 12 15 15 B 10 13 16 C 6 8 19 For the data in above table, assume probabilities of: (low demand) = 0.15, (medium demand) = 0.55, and (high demand) = 0.3. Using a Minimax regret approach the value of the lowest regret is. (Write the number only)
3. The manager for a manufacturing company must recommend whether to construct a large plant, construct a small plant or do nothing. He estimates the long-run profits in $ as follows: State of Nature Alternative Good Average Poor Market($) Market ($) Market ($) Construct a 100,000 35,000 -60,000 large plant Construct a 75,000 25,000 -40,000 small plant Do nothing -5,000 0 0 Probability 25% 50% 25% Solve using: A. Expected Opportunity Loss B. Expected Value of Perfect Information
B 8,000 A 4,000 10,000 20,000 Disposable income Figure 1.2 2) Refer to Figure 1.2. The slope of the line between Points A and B is A) 0.4. C) 2.5. B) 1.2. D) indeterminate from this information. Consumption

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a) Calculate the Expected Value of Perfect Information (EVPI) b) What do you recommend?