Suppose that the manufacturer of Example 9.1 is the kind of person who always worries about losing out on a good deal. For instance, he finds that if he delays expansion and economic conditions remain good, he will lose out by $ 84,000 (the difference between the $ 164,000 profit that he would have made if he had decided to expand right away and the $ 80,000 profit that he will actually make). Referring to this quantity as an opportunity loss, or regret, find
(a) The opportunity losses that correspond to the other three possibilities;
(b) The decision that would minimize the manufacturer’s maximum loss of opportunity.

  • CreatedNovember 04, 2015
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