Problem B (40 Points)

Joey has been analyzing how to attract new orders for his company. He understands that a new storage space is needed for his expanding production planned for year 2023. There are four storage renting services available near Joeys company. Here they are:

Gordon Lot: The flat fee with unlimited square feet access is $5,500.

Hillside Space: The initial contract fee is $2,000. Each square foot is $4.

Jamestown Storage: The initial contract fee is $3,500 which also includes the first 360 square feet free of charge. Each square foot beyond the included 360 square feet is $2.

Kingsville Land: There is no initial contract fee. Each square foot is $6.

Joey wants to select only one of these four possible renting services. Joey is planning on finding the lowest renting fee for his 2023 production. He reviews his possible incoming 2023 product orders and estimates his factory will produce between 120 to 500 units. Each unit of his products requires 3 square-feet storage space. The projected probabilities for the possible 2023 annual production are:

Probability (2023 annual production of 120 units) = 0.25

Probability (2023 annual production of 250 units) = 0.35

Probability (2023 annual production of 375 units) = 0.30

Probability (2023 annual production of 500 units) = 0.10

(B-1) Which renting service should Joey select according to the conservative approach?

(B-2) Construct a renting fee regret table and report which renting service should Joey select according to the Minimax regret approach.

(B-3) Which renting service should Joey select according to the expected value approach?

(B-4) If a sales expert can offer Joey the perfect prediction regarding his 2023 annual production unit count, how much is this perfect prediction worth to Joey?