Unformatted text preview: { X i < Y 1 , ∀ i  Y 1 = y } Pr { Y 1 = y } dy = Z 1 y =0 y 3 dy = 1 4 3. (a) States: 0 (expected revenue $600) and 1 (expected revenue $200. The transition probability is as follows: P = ± . 7 0 . 3 . 5 0 . 5 ² (b) π = 0 . 7 · π + 0 . 5 · π 1 π 1 = 0 . 3 · π + 0 . 5 · π 1 π + π 1 = 1 ⇒ π = 5 8 , π 1 = 3 8 (c) E (Revenue) = π · $600 + π 1 · $200 = 5 8 · $600 + 3 8 · $200 = $450 > $400 Yes, it is proﬁtable to open the store. 1...
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 Spring '07
 HOCHBAUM
 Operations Research, Probability theory, y1, Πi, transition probabilities, arrival time

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