A news dealer must decide how many copies of Snappy Almanac tostock in December.

Question

A news dealer must decide how many copies of Snappy Almanac tostock in December. She will not stock less than the lowest possibledemand or more than the highest possible demand. Each magazinecosts her $.5 and sells for $1.00. At the end of the month, theunsold magazines are thrown away. Three levels of monthly demandare equally likely: 10, 11, 12. if demand exceeds stock, sales,will equal stock.

What does maximin pay off mean ?

a) According to the maximin payoff criterion how many copies shouldshe stock ?



b) Which number of copies will provide the greatest expected payoff?

answer says = 5.17 but how do I get this.....

Explanation / Answer

help ? or hint please Thanks!

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