1. Patty is trying to determine which of two courses to take. If she takes the operations research course, she believes that she has a 10% chance of receiving A, a 40% chance for a B, and a 50% chance for a C. If Patty takes a statistics course, she has a 70% chance for a B, a 25% for a C, and a 5% chance for a D. Patty is indifferent between
If Patty wants to take the course that maximizes the expected utility for her final grade, which course should she take?
2. The Peppi Battery Company is faced with a decision to commit its production resources to one of three strategies selected from a much larger number of options considered. Company management has classified the future demand for its products into four possible scenarios and assessed the profit associated with each combination of strategy and demand level. They also subjectively assessed the likelihood that each demand level would occur. Those payoff values (in thousands) and the associated probabilities are given in the following table.
Determine the optimum strategy using each of the four methods of making a decision.
|
|
D1
|
D2
|
D3
|
D4
|
|
Strategy 1
Level Production
|
200
|
300
|
160
|
0
|
|
Strategy 2
Chase Demand using Overtime
|
350
|
0
|
0
|
50
|
|
Strategy 3
Partial second shift
|
0
|
70
|
550
|
200
|
|
Probability
|
0.2
|
0.4
|
0.3
|
0.10
|