A manager is deciding whether or not to build a small facility. Demand is uncertain and can be either at a high or low level. If the manager chooses a small facility and demand is low, the payoff is $100. If the manager chooses a small facility and demand is high, the payoff is $300. On the other hand, if the manager chooses a large facility and demand is low, the payoff is -$200, but if demand is high, the payoff is $800.

Part 1

Construct the payoff table

Part 2

Construct the opportunity loss table

Part 3

What decision would each of the following persons make

a) A pessimist

b) an optimist

c) Hurwicz with alpha = .07

d) Laplace

e) Minimax Regret

Please show all work or a table that accompanies each decision

Part 4

If the Low demand has a probability of 40%, what would be the best EMV here?

Part 5 If the Low demand has a probability of 40%, what would be the EVwPI?

Part 6 Using the information from parts 5 and 6, what is the EVPI?