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For the Pittsburgh Development Corporation problem in Section 13.3, the decision alternative to build the large condominium complex was found to be optimal using the
For the Pittsburgh Development Corporation problem in Section 13.3, the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. In Section 13.4 we conducted a sensitivity analysis for the payoffs associated with this decision alternative. We found that the large complex remained optimal as long as the payoff for the strong demand was greater than or equal to $17.5 million and as long as the payoff for the weak demand was greater than or equal to $19 million. There is a probability assessment of 0.8 that demand will be strong (s1) and a corresponding probability of 0.2 that demand will be weak [52). The payoff table is below. State of Nature Dec ion Alternative Strong Demand 51 Weak Demand 52 Small complex, d1 8 7 Medium complex, :12 14 5 Large complex, d3 20 *9 {a} Consider the medium complex decision alternative. What is the payoff under strong demand value [in millions of dollars} that would still keep decision alternative :13 the optimal solution? $ E m... (b) Consider the small complex decision altemave. what is the payoff under strong demand value (in millions of dollars) that would still keep decision alternative d3 the optimal solution? $ E m-mon
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