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hw_3_solution - Homework#3 Solution Decision Analysis and...

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1 Homework #3 Solution Decision Analysis and Revenue Management BUAD311- Operations Management Fall 2010 Hiroshi Ochiumi 1. (20 points) Question 6, page 138 in the text book $4 Million $3,000 x 1500 =$4.5 Million $2,000 x 1500 = $3 Million $5 Million $4,000 x 600 = $2.4 Million .70 .30 .60 Shopping Center Apartments Houses .60 .40 .40 Rezoned Not Rezoned 2 1 3 $3 Million $2 Million Rezoned shopping center: Point 1: Expected value = .70($4 Million) + .30($5 Million) = $4.3 Million Rezoned apartments: Point 2: Expected value = .60($4.5 Million) + .40($3 Million) = $3.9 Million Since a shopping center has more value, prune the apartment choice. In other words, if rezoned, build a shopping center with a profit of $4.3 Million - $3 Million = $1.3 Million If not rezoned: Point 3: Expected Profit is $2.4 Million - $2 Million = $.4 Million Expected profit is .60($1.3 Million) + .40($.4 Million) = $.94 Million
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2 2. (20 points) A flight has 91 seats left. The full-fare tickets are priced at $600 and the discount tickets are priced at $350. The airline estimates that the demand of full fare customers is between 51 and 100, all numbers equally likely.
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