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A local real estate investor in Orlando is considering three

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Problem 8
A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shown the profit or loss that could result from each investment.

Gasoline Availability

Investment Shortage Stable Supply Surplus

Motel $-8,000 $15,000 $20,000
Restuarant 2,000 8,000 6,000
Theater 6,000 6,000 5,000

Determine the best investment using the following decision criteria.
a. Maximax
b. Maximin
c. Minimax regret
d. Hurwicz ( α =.4)
e. Equal likelihood

Problem 26
The Steak and Chop Butcher Shop purchases steak from a local meatpacking house. The meat is purchased on Monday at $2.00 per pound, and the shop sells the steak for $3.00 per pound. Any steak left over at the end of the week is sold to a local zoo for $.50 per pound . The possible demands for steak and the probability of each are shown in the following table:
Demand (lb.) Probability
20 .10
21 .20
22 .30
23 .30
24 .10

The shop must decide how much steak to order in a week. Construct a payoff table for this decision situation and determine the amount of steak that should be ordered, using expected value.

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