Given is a decision payoff table. Future Demand Alternatives Low Moderate High S
ID: 375437 • Letter: G
Question
Given is a decision payoff table.
Future Demand
Alternatives
Low
Moderate
High
Small Facility
35
28
29
Medium Facility
22
36
26
Large Facility
-7
27
35
a) The best decision under uncertainty using MAXIMAX is to select facility
b) The best decision under uncertainty using MAXIMIN is to select facility
c) The best decision under uncertainty using LAPLACE/EQUALITY LIKELY is to select facility
d) If the probabilities for Future Demand when it is Low = 0.35, Moderate = 0.30, and High = 0.35, the expected monetary value (EMV) for the large facility = .
e) If the probabilities for Future Demand when it is Low = 0.35, Moderate = 0.30, and High = 0.35, the best decision under risk is to select facility.
Future Demand
Alternatives
Low
Moderate
High
Small Facility
35
28
29
Medium Facility
22
36
26
Large Facility
-7
27
35
Explanation / Answer
a) Using maximax, the decision is to select Medium Facility with moderate future demand as per below table -36
b) Using maximin, the decision is to select Small Facility with moderate future demand as per below table -28
c) Using Laplace/Equally Likely, the decision is to select Small Facility with any kind of demand as per below table -30.67. This is obtained by multiplying equal weight of 1/3 with the corresponding demand value.
d) EMV for large facility = (0.35*-7)+(0.3*27)+(0.35*35) = 17.9
e) EMV for Small facility = (0.35*35)+(0.3*28)+(0.35*29) = 30.8
EMV for Medium facility = (0.35*22)+(0.3*36)+(0.35*26) = 27.6.
The best decision under risk is to select small facility as the payoff is highest.
Future Demand Alternatives Low Moderate High Maximax Small Facility 35 28 29 35 Medium Facility 22 36 26 36 Large Facility -7 27 35 35Related Questions
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