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Unformatted text preview: IE426 Problem Set #4 Prof Jeff Linderoth IE 426 Problem Set #4 Due Date: November 30, 2006. 4:30PM. 1 My Brown Eyed Girl My long-haired friend Jim Sawyer is down on his luck. He has, however, concocted a new get-rich-quick scheme. Every morning, he will visit the local Pabst Blue Ribbon distributor and purchase a number of beers at a cost of $0.50 per beer. Jim can purchase at most 500 beers per day, since he cant fit any more than that into his VW Beetle. After purchasing the beer, Jim will wander the streets of Atlanta selling as many beers as he can at a cost of $1.50 per beer. At the end of the day, Jim drinks all the beer he doesnt sell, and for each beer Jim drinks, he counts $0.10 towards his profit. 1.1 Problem Suppose there are five beer-demand scenarios that occur with the probabilities shown in Table 1. Formulate a (linear) stochastic programming instance that will tell Jim the number of beers to purchase to maximize his expected profit. You can, for purposes of this problem, assume that Jim can purchase and return fractional numbers of beers. Table 1: Demand for Beer in Different Scenarios Scenario Demand Probability 1 20 0.05 2 40 0.1 3 300 0.60 4 500 0.15 5 800 0.1 1.2 Problem Create your model from Problem 1.1 in Mosel, and solve the stochastic program to help Jim determine his optimal policy. 1.3 Problem Determine the Expected Value of Perfect Information (EVPI) for Problem 1.1....
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