Using the following table, perform ALL FIVE of the techniques for Decision Making under Uncertainty: Maximax, Maximin, Hurwicz Realism (a = 0.7), LaPlace and Minimax Regret. You must show your work for obtaining the points. Large facility Medium-sized facility Small facility No facility STRONG MARKET 550,000 300,000 200,000 0 PROFIT (S) FAIR MARKET 110,000 129,000 100,000 0 POOR MARKET -310,000 -100,000 -32,000 0
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- Seneca Hill Winery recently purchased land for the purpose of establishing a new vineyard. Management is considering two varieties of white grapes for the new vineyard: Chardonnay and Riesling. The Chardonnay grapes would be used to produce a dry Chardonnay wine, and the Riesling grapes would be used to produce a semidry Riesling wine. It takes approximately four years from the time of planting before new grapes can be harvested. This length of time creates a great deal of uncertainty concerning future demand and makes the decision concerning the type of grapes to plant difficult. Three possibilities are being considered: Chardonnay grapes only; Riesling grapes only; and both Chardonnay and Riesling grapes. Seneca management decided that for planning purposes it would be adequate to consider only two demand possibilities for each type of wine: strong or weak. With two possibilities for each type of wine it was necessary to assess four probabilities. With the help of some forecasts in…3. The manager for a manufacturing company must recommend whether to construct a large plant, construct a small plant or do nothing. He estimates the long-run profits in $ as follows: State of Nature Alternative Good Average Poor Market($) Market ($) Market ($) Construct a 100,000 35,000 -60,000 large plant Construct a 75,000 25,000 -40,000 small plant Do nothing -5,000 0 0 Probability 25% 50% 25% Solve using: A. Expected Opportunity Loss B. Expected Value of Perfect InformationSeneca Hill Winery recently purchased land for the purpose of establishing a new vineyard. Management is considering two varieties of white grapes for the new vineyard: Chardonnay and Riesling. The Chardonnay grapes would be used to produce a dry Chardonnay wine, and the Riesling grapes would be used to produce a semidry Riesling wine. It takes approximately four years from the time of planting before new grapes can be harvested. This length of time creates a great deal of uncertainty concerning future demand and makes the decision concerning the type of grapes to plant difficult. Three possibilities are being considered: Chardonnay grapes only; Riesling grapes only; and both Chardonnay and Riesling grapes. Seneca management decided that for planning purposes it would be adequate to consider only two demand possibilities for each type of wine: strong or weak. With two possibilities for each type of wine it was necessary to assess four probabilities. With the help of some forecasts in…
- b) Perform Goal Seek Analysis in Excel, Technique of Model Driven Decision Support System. Using goal seek analysis technique of Model Driven Decision Support System, predict the number of pizza to be sold in a day to achieve the total income of Rs 272000/= while excluding all expenses like cost per Pizza (RS. 1000), salary per person (Rs. 1000 per day) we have 3 employees, shop rent per day (Rs. 2000) and 5% Tax. Price of a pizza is fixed to Rs 2500. Formulas on answer sheet as well.Given the following payoff table with the profits ($m), a firm might expect alternative investments (A, B, C) under different levels of interest rate. payoffs as profits states of nature 1(5%) decision 2(7%) 3(9%) alternatives A 14 22 6. B 19 18 11 12 17 15 (a) Which alternative should the firm choose under the maximax criterion? (b) Which option should the firm choose under the maximin criterion? (c) Which option should the firm choose under the LaPlace criterion? (d) Which option should the firm choose with the Hurwicz criterion with a = 0.2? (e) Using a minimax regret approach, what alternative should the firm choose? (f) Economists have assigned probabilities of 0.35, 0.3, and 0.35 to the possible interest levels 1, 2, and 3 respectively. Using expected monetary values, what option should be chosen and what is that optimal expected value? (g) What is the most that the firm should be willing to pay for additional information? Use Expected Regre (h) Use the alternative method to…2. Using the following table, perform ALL FIVE of the techniques for Decision Making under Uncertainty: Maximax, Maximin, Hurwicz Realism (α = 0.7), LaPlace and Minimax Regret. You must show your work for obtaining the points. PROFIT ($) STRONG MARKET FAIR MARKET POOR MARKET Large facility 550,000 110,000 -310,000 Medium-sized facility 300,00 129,000 -100,000 Small facility 200,000 100,000 -32,000 No facility 0 0 0
- Sales of a company (in $100,000) for the last 7 years are listed in the following table. Use the data as given in the table, do not include the hundred thousand at the end of the values. Year Q1 Q2 Q3 Q4 1 6 15 10 4 2 10 18 15 7 3 14 26 23 12 4 19 28 25 18 5 22 34 28 21 6 24 36 30 20 7 28 40 35 27 What are the adjusted R^2, and forecasts for Q1, Q2, Q3, and Q4 of Year 8 using this model? 4 decimals. Adjusted R^2: Q1: Q2: Q3: Q4:Maximax, Maximin, Minimax RegretLearning material: Watch this videoLab Scenario:Imagine a local entrepreneur is considering starting a business and has three options: open a coffeeshop, a bookshop, or a fusion coffee-bookshop. The entrepreneur is uncertain about the market'sreaction to these businesses. The possible market conditions are: favorable, neutral, and unfavorable.Data (Payoff Table in USD):Business Option Favorable Market Neutral Market Unfavorable MarketCoffee Shop 150,000 70,000 -30,000Bookshop 100,000 60,000 -20,000Fusion Shop 130,000 80,000 -10,000Positive values represent profits, and negative values represent losses.Assignment Steps:1. Maximax (Optimist's Criterion) Approach:For each business option, identify the maximum possible payoff.First Question What is the business option with the highest of these maximum payoffs? (5points)2. Maximin (Pessimist's Criterion) Approach:For each business option, identify the minimum possible payoff.Second Question What is the…Assume that the payoff table provides cost rather than profit payoffs. What isthe recommended decision using:i. the optimistic approachii. the conservative approachiii. the minimax regret approachiv. the Laplace method
- A situation in which a decision maker must choose between strategies that have more than one possible outcome when the probability of each outcome is unknown is referred to as: O certainty diversification risk O uncertainty MacBook Air 000 000 DD F7 F5 6日 5. 8.1. Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Economic condition Market Segment Improving Stable Declining Computers 10 4 Financial 8 Manufacturing 6. -2 Pharmaceuticals -1 a. What are the decision alternatives given? b. What are the states of nature What is the recommended decision using optimistic, conservative and minimax regret approaches, C.Supposed that a decision-maker faced with four decision alternatives and four states of nature develops the following profit payoff table.1. If the decision-maker knows nothing about the probabilities of the four states of nature, what is the recommended decision using the MAXIMAX criterion?2. What decision alternative will he choose if using the MAXIMIN criterion?3. What about MINIMAX REGRET CRITERION?4. What decision would he make if using the criterion of realism at alpha 0.6 is used?