Question 2 Waldo Books needs to decide how many copies of a new hardcover release to purchase for its shelves. The store has assumed that demand will be 50, 100, 150, or 200 copies next month and they need to decide whether to order 50, 100, 150 or 200 books for this period. Each book costs Waldo $20 and can be sold for $30. Waldo can sell any unsold books back to their supplier for $4. States of Nature Number of Books Demanded Amount Ordered 50 100 150 200 50 $500 100 ($ 300) 150 $ 1,500 200 ($600 ) From (b) to (h) if you do not show all work it is impossible to get full marks. You must also state all decisions to be deemed correct . (a) Complete the payoff table [ It is optional to show work for this point ] (b) Using an optimistic approach (maximax ), what quantity should Waldo Books make ? (c) Using a pessimistic approach (maximin ), what quantity should Waldo Books make ? (d) For a LaPlace decision maker, what quantity should Waldo Books make? (e) For a Hurwicz decision maker, what quantity should Waldo Books make a = 0.7? (f) Using a minmax regret approach , which option would you choose ? (g) If the demand probabilities are 20 9%, 35 9%, 25 96, and 20 % respectively which quantity will maximise expected profit? What is the expected profit associated with that recommendation (h) What is the most Waldo Books should be willing to pay to obtain further (perfect) information (EVPI ) concerning the actual demand