Ron Miller, owner of Miller Marketing is considering three options for his new product development: continuing with its own staff, hiring an outside vendor to do the managing (outsourcing), or a combination of its own staff and outside vendor.The payoff table is as follows:

Decision Alternatives

Good economy (S₁)Fair economy (S₂)Poor economy (S_{3 )}

In house, D₁60,00060,00050,000

Outsourcing, D₂80,00080,00030,000

Combination, D₃100,00070,00010,000

If nothing is known about the demand probabilities

a.Using conservative approach, specify the best decision alternative

b.Using the Minimax regret approach create the opportunity Loss/regret table and

Specify the best decision alternative.

Suppose the probabilities for Good, Fair, and Poor Economy are 30%, and 40% respectively,

c.Construct a Decision Tree and solve it using expected value approach.What is the recommended decision alternative?

d.Calculate the expected value of the perfect information (EVPI)?