Demand 400 500 600 700 800 Proability 30352555 What are the

Demand 400, 500. 600, 700, 800

Proability: 30,35,25,5,5,

What are the formulas to calculate this question?

Which alternative should be chosen based on the maximax criterion?

Which alternative should be chosen based on the maximin criterion?

Which alternative should be chosen based on the Lapalce (equally likely) criterion?

Which alternative should be chosen based on criterion of realism with alpha = 0.7?

Which alternative should be chosen based on the minimax regret criterion?

Which alternative should be chosen based on the EMV criterion?

Solution

Maximax is the optimistic selection which tries for the best of all.

Hence optimistic is assuming demand to be the highest 800.

Maximin is the pessimistic decision assuming the worst to happen.

Hence selection should be the least demand = 400units

Laplace assumes law of equally likely or equal probabilities for all demands. Hence 800 can be taken for this.

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Alpha = 0.7 and 1-alpha = 0.3

Maximax = 800

Maximax * alpha = 800(0.7) = 560

Maximin*(1-alpha) = 400(0.3) = 120

So highest of these two i.e. demand of 800 units is selected.