Waldo Books needs to decide how many copies of a new hardcover release to purcha

Question

Waldo Books needs to decide how many copies of a new hardcover release to purchase for its shelves. The store has assumed that demand will be 25, 50, 75, or 100 copies next month, and it needs to decide whether to order 25, 50, 75, or 100 books for this period. Each book costs Waldo $20 and can be sold for $30. Waldo can sell any unsold books back to the supplier for $4. The value for alpha is 0.7. Also, after researching the market, Waldo Books has concluded that the probabilities of selling 25, 50, 75, and 100 books next month are 0.20, 0.35, 0.25, and 0.20, respectively. QUESTION 1: What is the best value using the Hurwicz criterion? QUESTION 2: What is the best value using the minimax criterion? QUESTION 3: What is the best value using the EMV criterion? QUESTION 4: What is the best value using the EOL criterion?

Explanation / Answer

Given that buying cost is $ 20 and selling cost is $30. For this period, total amount of buying and selling cost for each demand is

Conditional profit is calculated with the help of demand if demand is less than order, 10*booksold-16 unsold

demand is greater than order, 10*booksold

QUESTION 1: The best value using the Hurwicz criterion is

The best value which is maximum hurwicz is demand 100.

QUESTION 2: the best value using the minimax criterion is

According to minimax criterion which generates the maximumminimum net profit among the different demand. 75 and 100 is equal change to select this.

the best value using the EMV criterion is

Demand Buying Cost Selling Cost Profit 25 500 750 250 50 1000 1500 500 75 1500 2250 750 100 2000 3000 1000

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