An airline decided to offer direct service from City A to City B. Management must decide between
Question:
An airline decided to offer direct service from City A to City B. Management must decide between a full service using the company's new fleet of jet aircraft and a discount service using the smaller commuter planes It is clear that the best choice depends on the market reaction to the service the airline offers. Management developed estimates of the contribution to profit for each type of service based upon 2 possible levels of demand for service to city B : strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars).
Service | Demand for service : Strong | Demand for service : Weak |
Full price | $940 | -$500 |
Discount | $650 | $310 |
(a) What is the decision to be made, what is the chance event, and what is the consequence for this problem? The decision to be made is - The chance event is . The consequence is How many decision alternatives are there? How many outcomes are there for the chance event? The recommended decision using the optimistic approach is the decision using the minimax regret approach is the service. The recommended decision using the conservative approach is the service. The recommende service. optimal decision. (Enter your answers in thousands of dollars.) EV(full) EV(discount) $$ thousands thousands The optimal decision is the service. thousands of dollars.) EV(full)$thousands EV(discount) $ thousands The optimal decision is the service. If the probability of strong demand falls below , the service is the best choice. If the probability of strong demand is greater than , the
Quantitative Methods for Business
ISBN: 978-0324651751
11th Edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam