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A mechanic, Bob, requires on average 3 h to complete a repair. Furthermore, the repair time closely follows an exponential distribution. Bob realizes that by hiring his nephew Bill as an assistant, he can reduce the average repair time to 2 h. The repair time would still be exponential because the job structure is unchanged. For each repair job, Bob gets paid $220 if he finishes in less than 2 h and $180 if he cannot. Assume that Bob does not want to decrease his expected payment per repair job. What is the maximum amount per job that Bob would be willing to pay Bill?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92288677

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