3.4 WECARE, a newly formed primary care group practice, is seeking a location among five possible sites. For these practices, which are largely unregulated for their locations, the location decisions are influenced mainly by market forces and the personal preferences of the key physicians. The data on potential profit for the demand levels at each possible site are shown in Table EX 3.4. Table EX 3.4 Payoff: Profit (in $000s) for Demand Levels Physician Preferred Site High Medium Low A 350 150 (250) B 590 350 (500) C 600 225 (250) D 550 400 (250) E 475 325 (200) a. Some members of the practice are pessimists. Which location would they choose? b. There also are very optimistic members in the group. Which location would they choose? c. What would be the Laplace strategy solution for the site? d. What is the minimax regret solution to this problem? e. What is the solution for a Hurwitz optimism value of 0.4? 3.9 Cooper Pharmaceuticals, a specialty pharmaceutical company, has made significant investments to develop several product lines of 3D printed drugs. However, with patents on some of its most popular brand- name drugs expiring in the near future, the company is expecting a significant financial hit. As a result, the Finance Department has determined that only two of the five product lines under development can continue to be supported at this time. As part of this decision, Cooper Pharmaceuticals must consider the likelihood of approval from the U.S. Food and Drug Administration (FDA) for the 3D printing of each product for consumer use. Table EX 3.9 shows the potential revenues (in millions of dollars) for each of the alternative product lines and the likelihood of FDA approval. Table EX 3.9 Payoff: Revenues (in $millions) and Probability of FDA Approval Product Line Likely Even Chance Alpha 250 [p = 0.35] 140 [p = 0.45] Unlikely (20) [p = 0.20] Beta 280 [p = 0.40] 155 [p = 0.35] (25) [p = 0.25] Gamma 425 [p = 0.35] 245 [p = 0.45] |(45) [p = 0.20] Delta 550 [p = 0.25] 300 [p = 0.40] |(60) [p = 0.35] Kappa 450 [p = 0.30] 275 [p = 0.25] (18) [p = 0.45] a. Under an optimistic strategy, which two product lines would be selected for continued research and development? b. Under a pessimistic strategy, which two product lines would be selected for continued research and development? c. Using the minimax regret strategy, which two product lines would be selected for continued research and development? d. Using the expected value model, which two product lines would be selected for continued research and development? e. A research report was released that outlines serious concerns about the effectiveness of 3D printed Gamma drugs. This report is believed to change the probability of FDA approval for 3D printed Gamma drugs so that approval is now 15 percent likely, 45 percent even chance, and 40 percent unlikely. Use the expected value model to determine whether the product line selection changes given these new probabilities. 3.25 To guide the decision for buying a new color ultrasound for the radiology department, the attribute/alternative matrix (Table EX 3.25) has been compiled from responses to a request for proposal (RFP). Table EX 3.25 Attribute/Alternative Supplier Supplier Supplier Supplier Importance Minimum Satisfaction Level #1 #2 #3 #4 Ranking Cost (in $000s) 20 18 17 18 10 7 Capacity 8 LO 5 7 8 4 >7 Product's Market 18% 22% 24% 20% 3 >20% Share Reliability 7 9 9 Ease of Maintenance 8 Ease of Use Supplier's Financial 7 5 679 8 9 186 9 1 >9 9 >8 7 7 5 62 >7 2 >7 Status Attribute scores reflect ratings of 1 through 10 (10 being best) with the exception of cost, delivery time, and product's market share. a. Use the dominance procedure to select the supplier. b. Use the minimum attribute satisfaction procedure to select the supplier. c. Use the most important attribute procedure to select the supplier.