A firm is considering the purchase of a complex piece of equipment from either of the...
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A firm is considering the purchase of a complex piece of equipment from either of the two suppliers S and S. The supplier S is capable of supplying the equipment on time to meet a certain desired deadline. The price chargeable by S is, however, considerable higher than that of S. It is felt by the management of the firm that S may deliver the equipment, or may not be able to deliver on time. It is even suspected that the supplier S may never be able to deliver the equipment to the specifications. However, the management believes that if it waits for some months, it may get better information on S's capabilities of supplying the equipment. The management is considering three alternative courses of action. Al Order from S. If later it is clear that S can supply, the order from Sican becanceled. A2 Order from S. If it is known later on that S cannot supply the equipment, the order may be switched to S. A3 Wait till the time information on S's capabilities are known. This would obviously cause delay. The profits in the various situations are: Event Course of Action Al A2 A3 El 250 100 200 E2 125 125 300 E3 250 625 450 where E1 = S fails to deliver, E2 = S delivers late, E3 = S delivers on time. What would be the management's decision according to the following criteria? i. Minimax. ii. Maximin. iii. Savage.[6 marks] A firm is considering the purchase of a complex piece of equipment from either of the two suppliers S and S. The supplier S is capable of supplying the equipment on time to meet a certain desired deadline. The price chargeable by S is, however, considerable higher than that of S. It is felt by the management of the firm that S may deliver the equipment, or may not be able to deliver on time. It is even suspected that the supplier S may never be able to deliver the equipment to the specifications. However, the management believes that if it waits for some months, it may get better information on S's capabilities of supplying the equipment. The management is considering three alternative courses of action. Al Order from S. If later it is clear that S can supply, the order from Sican becanceled. A2 Order from S. If it is known later on that S cannot supply the equipment, the order may be switched to S. A3 Wait till the time information on S's capabilities are known. This would obviously cause delay. The profits in the various situations are: Event Course of Action Al A2 A3 El 250 100 200 E2 125 125 300 E3 250 625 450 where E1 = S fails to deliver, E2 = S delivers late, E3 = S delivers on time. What would be the management's decision according to the following criteria? i. Minimax. ii. Maximin. iii. Savage.[6 marks]
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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