Reference no: EM133209320
Question: An electronics shop is about to buy some high-definition televisions (HDTVs). While these have 4K resolution, they do not have any advanced features such as HDR, QLED, or OLED. They can be ordered from the manufacturer at a cost of $210 each. The selling price will be set at $300 each. Demand is estimated as being between 11 and 16 inclusive with probabilities 0.15 for 11, 0.2 for 12, 0.3 for 13, 0.25 for 14, 0.08 for 15, and 0.02 for 16. After this purchase, they will only order higher-quality 4K and 8K resolution HDTVs; any leftover of these low-end 4K TVs will be marked down to $180 each (all leftover stock will sell with no problem at this price).
All parts (a) to (f) may be done either by hand or by using Excel.
(a) In a column give the alternatives, and use a row to give the outcomes. For each alternative and outcome, calculate the possible payoffs.
(b) To the right of part (a), create columns to determine a recommendation using each of the following criteria: (i) expected value, (ii) pessimism, (iii) optimism, (iv) Hurwicz using a coefficient of pessimism of 0.7, and (v) Laplace.
(c) Verify (b) (i) using the marginal analysis formula.
(d) Find the EVPI.
(e) Find the payoffs of the regret matrix.
(f) Calculate the EOL column, and verify the solution to (d).