3 Complete the regret table shown below for the problem that Myrtle Air faces in
ID: 465800 • Letter: 3
Question
3 Complete the regret table shown below for the problem that Myrtle Air faces in problem 1. (The payoff table is shown above.)
Demand for Service
Service
Strong
Weak
Full price
Discount
Problem 1:
1. Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company’s new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to Myrtle Beach: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars).
Demand for Service
Service
Strong
Weak
Full price
960
-20
Discount
670
320
Demand for Service
Service
Strong
Weak
Full price
Discount
Explanation / Answer
Regret table for the pay off :
Maximum regret approach = discount service
This table is for estimated quaterly profits, so the highest profit should be considered. So, if we choose the STRONG demand for the service, we should select the highest profit. Since this is for the regret table, we select 960
Full price : 960 - 960 = 0
Discount : 960 - 670 = 290
If we choose the WEAK demand for service, and since we should select the highest profit, and since it is the regret table we select 320
Full price : 320 - (-20) = 340
Discount : 320 - 320 = 0
maximum regret approach = discount service
strong demand for service weak demand for service maximum regret Full price 0 340 340 Discount 290 0 290Related Questions
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