A manufacturer must decide whether to extend credit to a retailer who would like to open an
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The credit agency concedes that its rating procedure is not completely reliable. In particular, the credit rating procedure will rate a low-risk customer as a moderate-risk customer with probability 0.10 and as a high-risk customer with probability 0.05. Similarly, the given rating procedure will rate a moderate-risk customer as a low-risk customer with probability 0.06 and as a high-risk customer with probability 0.07.
Finally, the rating procedure will rate a high-risk customer as a low-risk customer with probability 0.01 and as a moderate-risk customer with probability 0.05. Find the strategy that maximizes the manufacturer’s expected net earnings.
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Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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