Big Wheel Distributors sells three types of tires to the commercial market.

Type A. Type B and Type C. The anticipated payoffs are as follows for the three types of tires.

Light Demand Moderate Demand Heavy Demand

Probability 0.25 0.45 0.3

Tire

A $325,000 $190,000 $170,000

B $300,000 $420,000 $400,000

C -$400,000 $240,000 $800,000

A. What decision should the firm make if the maximax criterion is used?

B. What decision should "the firm make if the maximin criterion is used?

C. What decision should the firm make if the LaPlace criterion is used?

D. Construct a decision tree to help the management of Big Wheel Distributor make the appropriate decisions. This tree MUST be constructed in a logical order with labels and net payoffs.

E. Given the probabilities for the three types of tires and the expected monetary values, what decision should be made and what is that optimal expected value?

F. What is the most should the firm be willing to pay to obtain further (perfect) information (EVPI) concerning the demand for the tires?