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The concessions manager at our local college baseball game must decide whether to have the vendors sell sun visors or umbrellas. There is a 30% chance of rain, a 15% chance of overcast skies, and a 55% chance of sunshine, according to the weather forecast where the game is to be held. The manager estimates the following profits will result from each decision given each set of weather conditions.
Weather Conditions
Decision Rain .30 Overcast .15 Sunshine .55
Sun visors $-500 $-200 $1,500
Umbrellas $2,000 0 -900
a. Compute the expected value for each decision and select the best one using the Optimistic and Pessimistic approach.
b. Develop the opportunity loss table and compute the expected opportunity loss for each decision and determine the "minmax regret".
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