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

Waldo 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 Waldo $20 and can be sold for $30. Waldo can sell any unsold books back to the supplier for $4.

(a) Which option should Waldo 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?

After researching the market, Waldo Books 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.

Solution

a)

50*30   -   50*20 = 500

100*30 - 100*20 = 1000

150*30 - 150*20 =1500

200*30 - 200*20 =2000

maxi max criterion = 2000

option 200 books

b)

max min = 500

option = 50 books

c)

500 / 4 =125

1000 / 4 =250

1500 / 4 =375

2000 / 4 =500

option = 200 books

for the other literals

I can gladly help you but you should post it in a new question