Problem #30

Even though independent gasoline stations have been having a difficult time, Susan Solomon has been thinking about starting her own independent gasoline station. Susans problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table:

Size of First Station	Good Market ($)	Fair Market ($)	Poor Market ($)
Small	50,000	20,000	-10,000
Medium	80,000	30,000	-20,000
Large	100,000	30,000	-40,000
Very large	300,000	25,000	-160,000

For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000.

(a) Develop a decision table for this decision.

(b) What is the maximax decision?

(c) What is the Maximin decision?

(d) What is the equally likely Decision?

(e) What is the criterion of realism decision? Use an value of 0.8.

(f) Develop an opportunity loss table.

(g) What is the minimax reret decision?

Please show me your work so I can understand. Thanks!