Question 2 - (c Which option should APC choose under the...

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Question 2 APC industries have been experiencing significant growth and have been having difficulty meeting customer demands recently. They are considering three options to address this issue. They can move to a larger facility, add a second shift or use a subcontractor to assist in production. The annual payoff of each option depends on if the current market continues to expand hold s steady or declines. The expected payoff for each combination is show in the table Below Option Expand Steady decline Move to larger facility 250,000 125,000 -90,000 Add a second shift 175,000 80.000 -40,000 Subcontract 90,000 15,000 -10,000 (a) Which alternative should APC choose under the maximax criterion? (b) Which option should APC choose under the maximin criterion?
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Unformatted text preview: (c) Which option should APC choose under the LaPlace criterion? (d) Which option should APC choose with the Hurwicz criterion with α = 0.5? (e) Using a minimax regret approach, what alternative should she choose? (f) After reading about economic predictions , APC has assigned the probability that the market will be expand , or be steady or be weak at 20%, 50% and 30 %. Using expected monetary values, what option should be chosen and what is that optimal expected value? (g) What is the most that the APC should be willing to pay for additional information? Use Expected Regret (h) Use the alternative method to verify EVPI...
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