Question: Question 2: Problem solving (15 Marks) A transport company wants to increase its service capacity by purchasing a new truck. The company is faced with

Question 2: Problem solving (15 Marks) A

Question 2: Problem solving (15 Marks) A transport company wants to increase its service capacity by purchasing a new truck. The company is faced with three outcomes related to the demand on transport services, and three alternative decisions on truck purchase. The table below displays the estimated daily payoffs resulting from all combinations of decisions with outcomes. Alternative Decisions Outcomes (demand) 0,: High Oz: Moderate Oz: low A : Large truck $ 25,000 $ 11,000 $ -20,000 Az: Small truck $ 15,500 $ 7,500 $ -7,000 Az: no purchase $ 7,500 $ 5,000 $0 Probabilities 0.2 0.5 0.3 1. If the decision is taken under uncertainty, find the best decision using the Maximax criterion. 5 Marks) 2. Now with the given outcomes' probabilities, what is the best decision according to the EMV criterion? (5 Marks) 3. Use the EVPI to decide if the transport company should buy perfect information for $ 6000 or not

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