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KFC is considering opening a new restaurant at the capital city. It has three different models, each with a different seating capacity. KFC estimates that the average number of customers per hour will be 80, 100, or 120. The payoff table for the three models is on presented below.
Average no of Customers per hourModel S1 = 80 S2 = 100 S3 = 120A $8,000 $13,000 $12,000B $6,000 $16,000 $10,000C $4,000 $14,000 $19,000Prob 0.4 0.2 0.4(i) Calculate the expected value for each decision. Which model is optimal? How much to the maximum is KFC willing to pay in order to know the actual number of customer they expect to serve per hour?
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