Management Decision Science

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CLASS EXERCISE Chapter 3 3-28 (Page 125) Even though independent gasoline stations have been having a difficult time. Hachya Mehta has been thinking about starting her own independent gasoline station. Hachya’s problem is to decide how large station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Hachya developed the following table: |Size of First Station |Good Market ($) |Fair Market ($) |Poor Market ($) | |Small |50,000 |20,000 |-10,000 | |Medium |80,000 |30,000 |-20,000 | |Large |100,000 |30,000 |-40,000 | |Very Large |300,000 |25,000 |-160,000 | For example, if Hachya constructs a small station and the market is good, she will realize a profit of $50,000. a. Develop a decision table for this decision. b. What is the maximax decision? c. What is the maximin decision? d. What is the equally likely decision? e. What is the criterion of realism decision? Use an α value of 0.8. f. Develop an opportunity loss table. g. What is the minimax regret decision? 3-22 and 3-23 (a) (Page 124) Allen Young has always been proud of his personal investment strategies and has done very well over the past several years. He invests primarily in the stock market. Over the past several months, however, Allen has become very concerned about the stock market as a good investment. In some cases it would have been

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