Case 1 Retail pharmacy FarmaLux is open daily from 08:00 to 23:00. It is visited by an average of 135 buyers daily. Currently, the FarmaLux employs 2 pharmacists (customer attendants), each of whom labour cost for pharmacy amounts to 22 eur/hour (salary plus all taxes). On average it takes 10 minutes for a pharmacist to serve a client. A statistical analysis of the demand trend shows that it is realistic to expect a 5% increase in the demand for FarmaLux services in the near future. FarmaLux owners fear that because of that they might lose part of their profits due to the too slow turnover and excessive queues. According to the surveys, every minute spent by a customer while waiting for the acceptance and fulfillment of his/her order brings a loss of 0.25 euros in terms of a lost potential profit. Several options for the expansion of the pharmacy service capacity are being considered: 1) To set up another workplace and hire another 1 pharmacist (customer attendant); 2) Purchase advanced technical accounting and inventory management equipment. This would increase each pharmacist's customer service rate by 20%, but it would also add 13 to the pharmacy's operating cost per hour. 3) Dismiss one pharmacist and computerize the pharmacy's work. Such computerization would add 18 per hour to the pharmacy;s operating cost, but it would increase the customer service rate of the remaining pharmacist by 50%. What would you advice to FarmaLux management - and why? [60 points] Case 2: Ms Belle Jingle, who is about to divorce her husband, is facing a decision with four options and three possible scenarios. These relate to the real estate that is to be divided between her and her former spouse. The options range from a cash settlement (option 1) to aggressive litigation of the issue (option 4), when Belle could get as much as 1,000,000 or suffer 150,000 loss from litigation fees and related costs. What might happen if this issue is taken to court, is defined by the possible scenarios which include Scenario 1 (favorable judgement), Scenario 2 (arbitration) and Scenario 3 (lost case). The estimated values of possible outcomes are summarized in the table. Options Scenario 1 Option 1 250,000 Option 2 330,000 Option 3 480,000 Option 4 1,000,000 Scenario 2 250,000 170,000 120,000 -90,000 Scenario 3 250,000 0 -60,000 -150,000 1) What decision alternative shall be taken if: a) risk-aversive strategy... b) risk-taking strategy... c) regret minimizing strategy... is to be followed ? [15 pts] 2) Ms. Jingle's lawyer estimates that probabilities of the scenarios are the following ones - respectively: 30%, 40% and 30%. What decision alternative is recommendable if these estimations are taken into account? [5 pts] 3) What would be the upper level of honorarium that Ms Jingle could pay to the famous divorce attorney, whose presence on her lawyers team might change the scenarios' probabilities into more favourable ones: 45%, 30% and 25% (respectively for scenarios 1, 2 and 3)? [20 pts]