Question: 1. After researching the market, Waldo Books (see Problem 21) has concluded that the probabilities of selling 50, 100, 150, and 200 books next month are 0.2, 0.35, 0.25, and 0.2, respectively.
(a) Using EMVs, how many books should Waldo order?
(b) Using EOL, how many books should Waldo order?
(c) Compute Waldo's EVwPI and EVPI.
2. A souvenir retailer has an opportunity to establish a new location inside a large airport. The annual returns will depend primarily on the size of the space she rents and if the economy will be favorable. The retailer has worked with the airport concession commission, and has projected the following possible annual earnings associated with renting a small, medium, large, or very large space:
(a) What is the souvenir retailer's maximax decision?
(b) What is her maximin decision?
(c) What is her equally likely decision?
(d) What is her criterion of realism decision, using a = 0.8?
(e) What is her minimax regret decision?