Lawson's Department Store faces a buying decision for a seasonal product for which demand can be high, medium, or low The purchaser for Lawson's can order one, two, or three lots of the product before the season begins but cannot reorder later Profit projections (in thousands of dollars) are shown State of Nature High Demand Medium Demand Low Demand Decision Alternative S 1 S 2 S 3 Order 1 lot, d 1 60 60 50 Order 2 lots, d 2 80 80 30 Order 3 lots, d 3 100 70 10 If the prior probabilities for the three states of nature are 0 3, 0 3, and 0 4, respectively, what is the recommended order quantity At each preseason sales meeting, the vice president of sales provides a personal opinion regarding potential demand for the product Because of the vice president's enthusiasm and optimistic nature, the predictions of market conditions have always been either excellent E or very good (V) Probabilities are as follows P(E) 0 70P(s 1 E) 0 34P(s 1 V) 0 20 P(V) 0 30P(s 2 E) 0 32P(s 2 V) 0 26 P(s 3 E) 0 34P(s 3 V) 0 54 What is the optimal decision strategy c Use the efficiency of sample information and discuss whether the firm should consider a consulting expert who could provide independent forecasts of market conditions for the product

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Lawson's Department Store faces a buying decision for a seasonal product for which demand can be high, medium, or low. The purchaser for Lawson's can

Lawson's Department Store faces a buying decision for a seasonal product for which demand can be high, medium, or low. The purchaser for Lawson's can order one, two, or three lots of the product before the season begins but cannot reorder later. Profit projections (in thousands of dollars) are shown.

State of Nature

High Demand

Medium Demand

Low Demand

Decision Alternative

S₁

S₂

S₃

Order 1 lot, d₁

Order 2 lots, d₂

Order 3 lots, d₃

100

If the prior probabilities for the three states of nature are 0.3, 0.3, and 0.4, respectively, what is the recommended order quantity?
At each preseason sales meeting, the vice president of sales provides a personal opinion regarding potential demand for the product. Because of the vice president's enthusiasm and optimistic nature, the predictions of market conditions have always been either "excellent" E or "very good" (V). Probabilities are as follows:

P(E) = 0.70P(s₁/E) = 0.34P(s₁/V) = 0.20

P(V) = 0.30P(s₂/E) = 0.32P(s₂/V) = 0.26

P(s₃/E) = 0.34P(s₃/V) = 0.54

What is the optimal decision strategy?

c.Use the efficiency of sample information and discuss whether the firm should consider a consulting expert who could provide independent forecasts of market conditions for the product.

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To answer this we need to follow a systematic approach to decisionmaking under uncertainty using the given data Lets break down the problem and address each part stepbystep Part a Recommended Order Qu... blur-text-image