The owner of the Party City Toronto Company must decide among building a mega centre store, building 5 new stores, or leasing 10 of their locations to another company. The profit that will result from each alternative will be determined by whether material costs remain stable, increase moderately, or increase significantly. In the payoff table below the estimated profits/losses are given in $thousands. Material Costs Stable Mega Centre Decision New Stores Leasing Determine the best decision using the Maximax decision criterion. 2130 Moderate Increase 1850 840 530 1050 940 Decision: Mega Centre based on 2470 = max(2470,1850,1040) O Decision: Mega Centre based on 2130 = max(2130,1850,1040) O Decision: Stable based on 2130 = max(2130,1050,1040) O Decision: Leasing based on 2820 = max(190,2750,2820) Significant Increase -2470 -150 1040
The owner of the Party City Toronto Company must decide among building a mega centre store, building 5 new stores, or leasing 10 of their locations to another company. The profit that will result from each alternative will be determined by whether material costs remain stable, increase moderately, or increase significantly. In the payoff table below the estimated profits/losses are given in $thousands. Material Costs Stable Mega Centre Decision New Stores Leasing Determine the best decision using the Maximax decision criterion. 2130 Moderate Increase 1850 840 530 1050 940 Decision: Mega Centre based on 2470 = max(2470,1850,1040) O Decision: Mega Centre based on 2130 = max(2130,1850,1040) O Decision: Stable based on 2130 = max(2130,1050,1040) O Decision: Leasing based on 2820 = max(190,2750,2820) Significant Increase -2470 -150 1040
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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