Problem -andrew thomas a sandwich vendor at hard rock cafes, Ask an Expert

Management Studies

Problem -

Andrew Thomas, a sandwich vendor at Hard Rock Cafe's annual Rockfest, created a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd):

Alternatives	States of Natures (Demand)
Alternatives	Big	Average	Small
Large stock	$22,000	$12,000	-$2,000
Average stock	$14,000	$10,000	$6,000
Small stock	$ 9,000	$ 8,000	$4,000

The probabilities associated with the states of nature are 0.3 for a big demand, 0.5 for an average demand, and 0.2 for a small demand.

a) Determine the alternative that provides Andrew the greatest expected monetary value (EMV).

b) Compute the expected value of perfect information (EVPI).

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92173112

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