THE HIGHSCHOOL GRADUATION CATERING POLICY A UNIVERSITY IS CONSIDERING A CATERING
ID: 375594 • Letter: T
Question
THE HIGHSCHOOL GRADUATION CATERING POLICY
A UNIVERSITY IS CONSIDERING A CATERING POLICY FOR THE HIGHSCHOOL GRADUATIONS WHICH IT HOSTS. THE UNIVERSITY MUST CHOOSE ONE OF 3 POSSIBLE CATERERS WITH WHICH TO CONTRACT. THE PROFIT OBTAINED IS DEPENDENT ON THE NUMBER OF HIGHSCHOOL GRADUATIONS WHICH WILL BE HELD ON THE CAMPUS. UNFORTUNATELY, THIS WON'T BE KNOWN UNTIL THE CONTRACT WITH THE CATERER CHONSEN HAS ALREADY BEEN SIGNED.
FROM THE TABLE BELOW, DETERMINE, (1) THE CHOICE OF CATERER WHICH WILL MAXIMIZE RETURN TO THE UNIVERSITY
(2) THE EXPECTED MONETARY VALUE FOR THIS CHOICE, AND
(3) THE EXPECTED VALUE OF PERFECT INFORMATION. WHAT DOES THIS LAST RESULT MEAN?
NO. OF EXPECTED RETURN IN $(000'S) TO THE UNIVERSITY
HIGH- PROB- CATERER
SCHOOLS ABILITY CHANDLER XANADU THORVOLD
1 0.30 1.0 1.5 2.0
2 0.40 2.0 3.0 2.5
3 0.20 3.5 2.5 2.0
4 0.10 4.0 3.5 3.0
THE PROBABILITIES OF HIGHSCHOOLS HOLDING THEIR GRADUATIONS ON CAM-
PUS ARE BASED ON PREVIOUS YEARS' DATA. THE EXPECTED RETURNS ARE
ALSO BASED ON PREVIOUS YEARS' DATA ALSO.
Explanation / Answer
Question (1) THE CHOICE OF CATERER WHICH WILL MAXIMIZE RETURN TO THE UNIVERSITY
Answer - The caterer Xanadu is the best choice as it will give the maximum return.
Refer the weitage rating of the three caterers. Chandler (2.2), Xanadu (2.5) and Thorvold (2.3)
The probability of second caterer is better than the others. Hence this is the first preference choice.
Question (2) THE EXPECTED MONETARY VALUE FOR THIS CHOICE.
Answer - The sum of the value of this Xanadu caterer will be the expected monetary value that it will return to the unversity = $ 10.5 K = $10500
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