Different methods of production

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Reference no: EM13331941

The operations manager for a firm is considering the design of a new product. She has three different methods of production that can be used, each requiring differing costs. The payoffs of each method will vary depending on the demand for the product. The operations manager estimates the profit will vary according as follows:

PRODUCTION Method
DEMAND

STRONG MEDIUM WEAK
Build complete new $100,000 $50,000 $-100,000
production line

Modify existing $50,000 $25,000 $-10,000
Production line

Outsource $25,000 $20,000 $10,000

a. Given the previous information, this would considered decision-making under conditions of: ____________
b. If she uses the maximin criterion, which production method will she choose?
c. If she is an optimist, what criterion would she choose?
d. If she uses the criterion of part c, which production method will she then choose?
e. If she uses the equally likely criterion, which production method will she choose?

Reference no: EM13331941

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