A concessionaire for the local ballpark has developed a table of conditional val

Question

A concessionaire for the local ballpark has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd).

If the probabilities associated with the states of nature are 0.40 for a large crowd, 0.30 for an average crowd, and 0.30 for a small crowd, determine:

(a)        the opportunity loss table.

(b)        minimum expected opportunity loss (EOL).

alternatives large average small Large Inventory $22,000 $12,000 -$2,000 Average Inventory $15,000 $12,000 $6,000 Small Inventory $9,000 $6,000 $5,000

Explanation / Answer

b)

So, minimum EOL = 2400

large average small Large inventory 0 0 8000 Average inventory 7000 0 0 Small inventory 13000 6000 1000

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