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The owner of the Sliding By Ski Slopes in southern Pennsylvania mountains is trying to decide whether or not to rent snow-making equipment for coming winter season. He has lived in area and operated the ski resort for only the past four winters.

There're three rental equipment options: 1) rent none; 2) rent enough to give snow for about 30% of the trails; and 3) rent enough to offer snow for about 60% of the trails. He has projected profits for each of such alternatives under three conditions: little snow, average snow, and heavy snow. The data is included in following table.

Projected Profits

Alternative Actions

State

 

Little snow

Average snow

Heavy snow

No Rental

$-200,000

$200,000

$600,000

30% trails open

$-100,000

$200,000

$500,000

60% trails open

$100,000

$200,000

$400,000

Determining which alternative action to select depends on how much snow to expect this winter. The owner employs his experience to estimate the probabilities: of the last 4 years in the region, one had light snow, two had average snow, and one had heavy snow.

Make the corresponding decision tree and make recommendations.

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M917648

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