Southland Corporation's decision to produce a new line of recreational products has resulted in the need to choose one of two automated manufacturing systems based on proposals from two vendors, A and B. The economics of this decision depends on the market reaction to the new product line. The possible long-run demand has been defined as low, medium, or high. Based on detailed financial analyses of system costs as a function of volume and sales under each demand scenario, the following payoff table gives the projected profits in millions of dollars. Long-Run Demand Decision Low Medium High Vendor A $230 $300 $300 Vendor B $140 $300 $650 Determine the best decisions using the maximax, maximin, and opportunity loss decision criteria. Using the maximax criterion, choose . Using the maximin criterion, choose . To minimize the maximum opportunity loss, choose . Assume that the best estimate of the probability of low long-run demand is 0.30, of medium long-run demand is 0.15, and of high long-run demand is 0.55. What is the best decision using the expected value criterion? Round your answers to two decimal places. The expected payoff for Vendor A is $ million. The expected payoff for Vendor B is $ million.
Southland Corporation's decision to produce a new line of recreational products has resulted in the need to choose one of two automated manufacturing systems based on proposals from two vendors, A and B. The economics of this decision depends on the market reaction to the new product line. The possible long-run demand has been defined as low, medium, or high. Based on detailed financial analyses of system costs as a function of volume and sales under each demand scenario, the following payoff table gives the projected profits in millions of dollars.
| Long-Run Demand | ||||||
| Decision | Low | Medium | High | |||
| Vendor A | $230 | $300 | $300 | |||
| Vendor B | $140 | $300 | $650 |
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Determine the best decisions using the maximax, maximin, and opportunity loss decision criteria.
Using the maximax criterion, choose .
Using the maximin criterion, choose .
To minimize the maximum opportunity loss, choose .
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Assume that the best estimate of the probability of low long-run demand is 0.30, of medium long-run demand is 0.15, and of high long-run demand is 0.55. What is the best decision using the expected value criterion? Round your answers to two decimal places.
The expected payoff for Vendor A is $ million.
The expected payoff for Vendor B is $ million.
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