Demand for the 2022 model X sports car are expected to be fifty, sixty or seventy cars. There is a probability of 0.4 that the demand will be fifty cars, 0.5 for sixty cars and a probability of 0.1 that the demand will be seventy cars. Total cost per car is expected to be $20,000 and the anticipated selling price for the local public is $50,000.

Additionally, the car dealer believes that later in 2023 when the new models arrive, they can resell any unsold 2022 cars to an African automobile agent, but the dealer is uncertain (does not know so far) as to the price the African agent will pay.

Your job is to build a decision payoff table that shows the purchasing alternatives and the probable selling outcomes. Then, determine what selling price should the African agent pay so that the dealer’s best alternative is to order seventy cars. 

Answer rating: 100% (QA)

A decision payoff table First Part of the problem the possible payoff taking the ... View the full answer