Belinda Tire and Rubber, Inc. is considering expanding production to meet potential increases in the demand for
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Question:
Belinda Tire and Rubber, Inc. is considering expanding production to meet
potential increases in the demand for one of its tire products. Belindas
alternatives are to construct a new plant, expand the existing plant, or do nothing
in the short run. The market for this particular tire product may expand, remain
stable, or contract. Belindas marketing department estimates the probabilities of
these market outcomes as and respectively. Table I contains
Belindas estimated payoff.
a Construct a decision tree for this problem.
b Identify the strategy that maximizes Belindas expected profit.
Market Outcome dollars
Decision Market expands Market stable Market contracts
Construct a new plant
Expand existing plant
Do nothing
Table I
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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