Question
A grocer must decide how many cases of milk to stock each week in order to meet demand. The probability distribution of demand is Demand
A grocer must decide how many cases of milk to stock each week in order to meet demand. The probability distribution of demand is
Demand (cases) | Probability |
15 | .20 |
16 | .25 |
17 | .40 |
18 | .15 |
1.00 |
Each case costs the grocer $10, who, in turn, sells it for $12. Unsold cases are sold to a local farmer (who mixes it with feed for livestock) for $2 per case. If a shortage exists, the grocer considers the prot of $2 per case to be a cost. In addition, customer ill will costs are $2 per case. Thus, a shortage cost of $4 per case is incurred. 1.What is the payoff when the supply is 18 and the demand is 18 ? 2.What is the payoff when the supply is 15 and the demand is 16? 3.What is the payoff when the supply is 15 and the demand is 15? 4.What is the payoff when the supply is 15 and the demand is 17? 5.What is the payoff when the supply is 17 and the demand is 18? 6.What is the payoff when the supply is 17 and the demand is 16? 7.What is the payoff when the supply is 16 and the demand is 15? 8.What is the payoff when the supply is 17 and the demand is 17? 9.What is the payoff when the supply is 18 and the demand is 17 ? 10.What is the EV when the supply is 18? 11.What is the EV when the supply is 15? 12.What is the payoff using the Laplace criteria? 13.What is the payoff using the Maximax criteria? 14.What is the payoff using the EV criteria? 15.What is the payoff using the MaxiMin criteria? 16.What is the payoff using the Hurwics criteria given that the coefficient of optimism is 0.2? 17.What is the EVPI for this decision problem? 18.Attach a copy of your payoff table and your other computations here.
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