Determine the best decision act from the standpoint of the minim ax regret criterion for the decision situation described in Problems 18.1 and 18.2. Problems 18.1 Based on a new technological...


Determine the best decision act from the standpoint of the minim ax regret criterion for the decision situation described in Problems 18.1 and 18.2.



Problems 18.1


Based on a new technological approach, a manufacturer has developed a color TV set with a 45-in picture tube. The owner of a small retail store estimates that at the selling price of $2,800 the probability values associated with selling 2, 3, 4, or 5 sets during the three months of concern are 0.30, 0.40, 0.20, and 0.10, respectively. Based only on these probability values, how many sets should the retailer order for stock, assuming no reorders are possible during the period?



Problems 18.2


For the inventory decision situation in Problem 18.1, the profit margin for each set sold is $200. If any sets are not sold during the three months, the total loss per set to the retailer will be $300. Based on these economic consequences alone, and ignoring the probability values identified in Problem 18.1, determine the best decision act from the standpoint of the maxim in and of the maxima criteria.







May 26, 2022
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