Colin sells pretzels at the local high school basketball games. For an upcoming game, Colin has to decide how many pretzels to order (170, 190, or 210), at a cost of $0.50 each. Colin sells pretzels for $1.50 each. However, any unsold pretzels must be thrown away.
If the game is interesting, Colin thinks that fewer people will visit his stand. In such a case, Colin estimates that demand will be normally distributed, with a mean of 140 and a standard deviation of 20. However, if the game is a blowout, he expects more people to visit the stand. Demand in this case follows a discrete uniform distribution between 180 and 200. Based on his familiarity with the two teams, he estimates that there is only a 40% chance that the game will be a blowout.
Set up a simulation model and replicate it N times for each order size to determine Colin’s expected profit and expected percentage of unsold pretzels. What do you recommend that Colin do?