2-19 Shaq Bryant sells newspapers on Sunday morn- ings in an area surrounded by

Question

2-19 Shaq Bryant sells newspapers on Sunday morn- ings in an area surrounded by three busy churches. Assume that Shaq's demand can either be for 100, 300, or 500 newspapers, depending on traffic and weather. Shaq has the option to order 100, 300, or 500 newspapers from his supplier. Shaq pays $1.25 for each newspaper he orders and sells each for $2.50 (a) How many papers should Shaq order if he chooses the maximax criterion? chooses the maximin criterion? chooses the equally likely criterion? chooses the criterion of realism with = 0.4 chooses the minimax regret criterion? (b) How many papers should Shaq order if he (c) How many papers should Shaq order if he (d) How many papers should Shaq order if he 5? (e) How many papers should Shaq order if he

Explanation / Answer

Solution:

a) The papers should Shaq order if he chooses the maximax criterion is

max max criterion = 625

papers = 500

b) Max min criterion will be = 125

papers = 100

c) Equaly likely criterion

you need to divided the total earns by 3 because there are 3 options

so the expected value of each will be :

for 100 papers = 125/3 =41.67

for 300 papers = 375/3 = 125

for 500 papers = 625/3 = 208.33

you should take the max value because is more probably that that value will be the best

so Papers = 500

d) We take the max value that is 625 multiply by 0.45 and then we add the multplication of the min value that is 125 by (1-0.45) the answer is

350

the total papers will be 100 because the total that you can earns being realistic is 350 and that value is not in the table so you cant pass over that 350 so 300 papers will not be the answer because you earns 375$$$

so the one posibilitie is 100

e) We need to take the max value that is 625 and subtract to the other

625-125= 500

625-375= 250

625-625 =0

we need to take the max value that is our regret

so the papers will be 100

Papers Pays sells total earns 100 125 250 125 300 375 750 375 500 625 1250 625

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