2. The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer A. revenues. B. surplus. C. costs. D. utility. Industrial and Systems Engineering in Healthcare Assignment 02 Due Date: 09/12/2019 at 11:59 PM Instructions Submit your responses in an excel file to blackboard Grading rubrics: (Total 100 points) Questions 1. In an effort to standardize joint replacement surgery and reduce costs, the Chief of Service in an orthopedic surgery department has proposed limiting staff to specific device manufacturers. Research conducted on the devices from each of the manufacturers under consideration suggests there is no significant difference in failure rate. Accordingly, the decision to limit manufacturers will be based solely on cost minimization, and the cost of each contract will vary according to the negotiated discount. The payoff table (Table 1) depicts costs and probabilities of the discount levels Table 1: Payoff table Cost (in Smillions) and Probability of Discount Level Manufacturer Significant Discount Moderate Discount Minor Discount Stryker 10 (p = 0.25) 24 [p = 0.50) 48 (p = 0.25] DePuy 9.5 [p = 0.30] 20 [p = 0.55) 46 [p = 0.15] Zimmer 11 (p = 0.35) 30 (p = 0.45) 50 (p = 0.20) a) Assuming the Chief of Service is an optimist, which manufacturer would be chosen? b) Assess the expected losses by constructing a regret table using the cost data. Which manufacturer would be chosen under minimax regret? c) Using the cost data and probabilities of discount, which manufacturer would be selected under EMV? d) Suppose one of the surgeons in the department has a preference for the Biomet device, and has requested that this manufacturer also be included for consideration. Having explained the potential loss of business to the Biomet sales representative, the hospital has worked out a deal that will 100 percent guarantee a significant discount on the Biomet device for $20 million. Given this information, does the solution to part (c) change? If so, which manufacturer would be selected