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9. Continuing with the Hudson Corporation problem in which the cost of operations is dependent upon future demand, the following payoff table gives the annual cost (in $1000s) of each option for the three states of nature (demand): Demand Staffing Options S1 - High s2 - Medium s3 - Low dl - Own staff 650 650 600 12 - Outside vendor 900 600 300 13 - Combination 800 650 500 (a) It is determined that the demand probabilities for the three states of nature are 0.4, 0.3, and 0.3. On a scrap paper, draw the Decision Tree to represent this problem. (b) Using the Expected Value approach, find the expected costs in $ for each decision alternative. (whole number) Note: refer back to payoff table for magnitude of costs. EV(dl) = $ EV(42) = $ EV(d3) = $ (c) Which decision alternative will minimize the expected cost of the data processing operation? (d) What is the expected value of perfect information, EVPI? $ 8. Hudson Corporation is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: Demand Staffing Options S1. High s2 - Medium s3 - Low dl - Own staff 650 650 600 d2 - Outside vendor 900 600 300 13 - Combination 800 650 500 If the decision maker knows nothing about the probabilities of the three states of nature, what is the recommended decision using: (a) the optimistic approach? (b) the conservative approach? (c) Fill in a minimax regret table on your scrap paper. Put the Maximum Regrets in the table below. Staffing Options Max Regret Cost, (S1000) d1 - Own staff 42 - Outside vendor 13 - Combination (d) What is the recommended decision minimax regret approach