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Jerry has been promoted to the position of regional sales manager for Marlin Enterprises. As a perk of the new position, Jerry has been
Jerry has been promoted to the position of regional sales manager for Marlin Enterprises. As a perk of the new position, Jerry has been offered the opportunity to enroll in a corporate travel club. Members of the travel club pay a fixed annual membership fee in exchange for, among other benefits, the club reimbursing some or all of their personal travel expenses. Jerry's estimate of potential travel expenses in the next year is shown in the table below. Travel expenses ($1000s) Probability 0 44.31% 1.71 22.00% 2.94 13.64% 4.17 8.32% Option 3: No Membership Jerry pays no annual membership fee and pays directly for any travel expenses incurred. 5.4 5.16% 6.63 7.86 3.09% 2.07% Jerry is considering whether to enroll in the organization's travel club. There are three alternatives for Jerry to consider. Option 1: Full Travel Membership Annual membership fee of $2,925 and reimburses 100% of any travel expenses incurred Option 2: VIP Travel Membership Annual membership fee of $855 and reimburses the portion of travel expenses that exceed $2,525. (For example, if travel expenses are $4,170, the VIP Membership would pay Jerry back ($4,170 - $2,525 = $1,645). 9.09 1.41% Which membership option will Jerry chose according to the Maximax rule? (Please include the number of the option in your answer) [maximax] Which membership option will Jerry chose according to the Maximin rule? (Please include the number of the option in your answer) [maximin] What is the expected payoff (EMV) for the VIP Travel Membership? [emv]
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To answer this question we will consider each membership option that Jerry is considering and apply the Maximax and Maximin rules Firstly lets list Jerrys options 1 Full Travel Membership Annual fee o...Get Instant Access to Expert-Tailored Solutions
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