In view of the approaching hot summer, people are resorting to buying electric fans as a measure of conservation of energy since electric bills tend to be huge if the air-conditioning plant is used. Mr. Brown, the sales manager of a local departmental store, is considering buying fans from a wholesaler at $50 each and selling them to customers at $60. The unsold fans cannot be returned to the wholesaler. A survey of the prospective customers suggests the underlying probability distribution for the number who would buy a fan.

Demand 60 ____ 80_____ 100

Probability .20 .50 .30

of demand

(a) Construct the payoff table.

(b) Construct an opportunity loss table.

(c) What is the best decision based on the minimax criterion? In other word, how many units should Mr. Brown order by the minimax criterion?

(d) What is the best decision based on the maximin criterion?

(e) What is the best decision based on the maximum expected payoff criterion?

(f) What is the maximum amount of cost this company could pay to get the full information about the future demand?