Peer Reply #2: Choose a classmate's post and review their decision process. Further the math conversation by taking on the role of the business partner. Would you agree/disagree with his or her decision strategy? Are there any factors that have been overlooked that would affect his or her decision process? Would you choose the same two decision strategies under uncertainty?

-CLASSMATES DISCUSSION POST-

I am the owner and sole proprietor of a taco stand in downtown Tucson, Arizona. I am considering expanding and adding more taco stands in other locations around the city. In order to determine the best business decision, I will create some different scenarios and analyze the data.

Three alternatives for my business are:

1. Do a mass expansion by adding 5 new taco stands around Tucson

2. Add just 1 new taco stand at the other end of downtown Tucson

3. Remain a single stand operation

Three states of nature of my business are:

1. High demand for my delicious tacos

2. Moderate demand for my delicious tacos

3. Low demand for my delicious tacos

On a quintessential high demand day, I sell about $500 in tacos per stand, with overhead expenses of $100. Therefor, my net income is $400 per day.

On a quintessential moderate demand day, I sell about $300 in tacos per stand, with overhead expenses of $100. Therefor, my net income is $200 per day.

On a quintessential low demand day, I sell about $75 in tacos per stand, with overhead expenses of $100. Therefor, my net loss is $25 per day.

I will construct my decision table based on the above profit/losses per taco stand.

High taco Moderate Low taco demand taco demand demand 5 new taco stands $2,400 $1,200 ($150) 1 new taco stand $800 $400 ($50) 0 new taco stands $400 $200 ($25) I chose to use the Optimistic and Criteria of Realism strategies. The Optimistic (Maximax) decision is to open 5 additional taco stands with a possible payoff of $2,400 per day. Maximax Decision Process High taco Moderate Low taco Alternative demand taco demand demand value 5 new taco stands $2,400 $1,200 ($150) 2400 1 new taco stand $800 $400 ($50) 800 0 new taco stands $400 $200 400 Alternative 4 Maximax 2400Hurwicz Criteria Decision Process O= 0.7 High taco Moderate Low taco Alternative demand taco demand demand value 5 new taco stands $2,400 $1,200 ($150) 1635 1 new taco stand $800 $400 ($50) 545 0 new taco stands $400 $200 ($25) 272.5 Hurwicz Criteria 1635