Market segmentation and chance aaronsair see exercises 32, Ask an Expert

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Market segmentation and chance. Aaron'sAir (see Exercises 32 and 34) estimates that high-demand periods (which depend on the weather and on bookings for confer- ences) occur with probability .3 and medium demand peri- ods occur with probability .5. The rest are low-demand periods.

a) What's the expected value of each of Aaron's alternative actions?

b) What are the standard deviations for each action?

c) What are the RRRs? Based on the RRRs, what action is best?

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