The owner of a small specialty food store stocks specially aged steak. In the past 100
weeks, the store has experienced the following weekly demand for this steak (in
pounds):
The owner buys the meat from his supplier for $2.10 per pound and sells the steak for
$5.00 per pound. All that is left unsold at the end of the week is sold at a discount to the
county animal shelter at $0.50 per pound.
The food store owner wants to know how many pounds of steak to consistently order
per week.
NOTE: In parts 13, 14, and 23 you MUST provide copies of your tables and
of your Excel spreadsheet containing your calculations for this problem to
receive credit for problem B. You are also reminded to submit all of your
computer files for this problem with your completed exam to the “Final
Exam” link on Bb. Failure to provide any of these deliverables will result in
this problem NOT being scored.
13. Build the payoff table for this decision situation.
In a space created below this part, you must present your payoff table
HERE.
14. Build the regret table for this decision situation.
In a space created below this part, you must present your regret table
HERE.
15. a. In new lines entered below this part, state the best (that is, the optimal)
decision according to the expected value criterion for the appropriate number of
pounds of steak to consistently stock.
b. In new lines entered below this part, state the dollar amount of the
profit expected from this decision.
16. a. In new lines entered below this part, state the decision alternative
indicated by the maximum likelihood criterion.
b. In new lines entered below this part, state the dollar amount of the
profit from the maximum likelihood decision.
17. In new lines entered below this part, answer the following question: Are the
decisions alone (not including the payoffs) of parts 15 and 16 the same? (Yes or
no.) Whether they agree or not, explain why. (Failure to explain why will be
penalized.)
Assume now that the probabilities given above are no longer valid.
18. a. In new lines entered below this part, state the best decision if the
owner is an optimist.
b. In new lines entered below this part, state the payoff from the best
decision if the owner is an optimist.
19. a. In new lines entered below this part, state the best decision if the
owner wants to minimize his largest possible regret.
b. In new lines entered below this part, state the payoff from the best
decision from using the above decision-making criterion.
20. a. In new lines entered below this part, state the best decision if the
owner is a pessimist.
b. In new lines entered below this part, state the payoff from the best
decision is a pessimist.
21. a. In new lines entered below this part, state the best decision if the
owner wants to hedge between optimism and pessimism by using a coefficient
of optimism with the numerical value of 0.60.
b. In new lines entered below this part, state the payoff from the best
decision using the above decision-making criterion.
22. In new lines entered below this part, state the dollar amount the owner
should be willing to pay to improve the decision over the best decision found in
part 15 above.
23. In a space created below this part, you must present HERE a copy of your
Excel spreadsheet for problem B.
· AND submit all of your computer files for this problem with your
completed exam to the “Final Exam” link on Bb. Include in the filename/tab
name “Prob B.”