Question: I would like to know how to construct the payoff table attatched above. Could you show me your work in detail? thanks. 28. The Steak


I would like to know how to construct the payoff table attatched above. Could you show me your work in detail? thanks.
28. The Steak and Chop Butcher Shop purchases steak from a local meatpacking house. The meat is purchased on Monday at $2.00 per pound, and the shop sells the steak for $3.00 per pound. Any steak left over at the end of the week is sold to a local zoo for $.50 per pound. The possible demands for steak and the probability of each are shown in the following table: Demand (lb.) Probability .10 20 21 22 23 24 .20 .30 .30 .10 1.00 The shop must decide how much steak to order in a week. Construct a payoff table for this deci- sion situation, and determine the amount of steak that should be ordered, using expected value. 28. Payoff matrix: Demand 20 21 22 23 24 Stock (lb) .10 .20 .30 .30 .10 20 21 $20.00 18.50 $20.00 21.00 19.50 $20.00 21.00 $20.00 21.00 22 17.00 22.00 $20.00 21.00 22.00 23.00 21.50 22.00 23 15.50 18.00 20.50 23.00 24 14.00 16.50 19.00 24.00 EV(20) = $20.00; EV(21) = 18.50(.1) + 21.00(.2) + 21.00(.3) + 21.00(.3) + 21.00(.1) = $20.75; EV(22) = 17.00(-1) + 19.50(-2) + 22.00(.3) + 22.00(3) + 22.00(.1) = $21.00: EV(23) = 15.50(.1) + 18.00(-2) + 20.500.3) + 23.00(.3) + 23.00(.1) = $20.50; EV(24) = 14.00(.1) + 16.50(-2) + 19.00(.3) + 21.50(.3) + 24.00(.1) = $19.25; stock 22 lbStep by Step Solution
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