Carry Books needs to decide how many copies of a new hardcov

Carry Books needs to decide how many copies of a new hardcover release to purchase for its shelves. The store has assumed that demand will be 50, 100, 150, or 200 copies next month, and it needs to decide whether to order 50, 100, 150, or 200 books for this period. Each book costs Carry $20 and can be sold for $30. Carry can sell any unsold books back to the supplier for $4.

(a) Which option should Carry choose if it uses the maximax criterion?

(b) Which option should Waldo choose if it uses the maximin criterion?

(c) Which option should Waldo choose if it uses the equally likely criterion?

(d) Which option should Waldo choose if it uses the criterion of realism with a = 0.7?

(e) Which option should Waldo choose if it uses the minimax regret criterion?

(f) Using EMVs, how many books should Waldo order?

(g) Using EOL, how many books should Waldo order?

*Answers should be in monetary values*

Solution

Demand Carrying Cost Sales profit 20 30 50 1000 1500 500 100 2000 3000 1000 150 3000 4500 1500 200 4000 6000 2000 1 If maximax criteria is chosen Order 200 books $ 2000 profit 2 If maximin Criteria is chosen order 50 books $ 50 profit 3 If equally likely criteria is chosen 100 books will be ordered 1000 profit