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```Name & Surname
:…………………………….
Date
:01/04/2013 Time: 17:00
Number
:…………………….
Duration : 120 minutes
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Total Score :…………….
Department of Management
Class of BUS 564 Advanced Decision Making Final Exam
1-
A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from
the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be
relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment:
Gasoline Availability
Investment Shortage Stable Supply Surplus
Motel
\$ 6,000
\$10,000
\$20,000
Restaurant
2,000
15,000
6,000
Theater
8,000
4,000
5,000
Determine the best investment, using the following decision criteria.
a. Minimax regret
b.Hurwicz (a= .4)
2-
The Valley Wine Company purchases grapes from one of two nearby growers each season to produce a particular red wine. It
purchases enough grapes to produce 3,000 bottles of the wine. Each grower supplies a certain portion of poor-quality grapes,
resulting in a percentage of bottles being used as fillers for cheaper table wines, according to the following probability
distribution:
Profit
Probability of Percentage Defective
Defective (%) Grower A Grower B
Defective (%)
Grower A
Grower B
2
.15
.30
2
\$44,200
\$42,600
4
.20
.30
4
40,200
40,300
6
.25
.20
6
36,200
38,000
8
.30
.10
8
32,200
35,700
10
.10
.10
10
28,200
33,400
The two growers charge different prices for their grapes and, because of differences in taste, the company charges different
prices for its wine, depending on which grapes it uses. Following is the annual profit from the wine produced from each grower's
grapes for each percentage defective:
Use decision tree analysis to determine from which grower the company should purchase grapes.
3-
The Loebuck Grocery must decide how many cases of milk to stock each week to meet demand. The probability distribution of
demand during a week is shown in the following table:
Demand (cases) Probability
15
.20
16
.25
17
.40
18
.15
1.00
Each case costs the grocer \$ 8 and sells for \$12. Unsold cases are sold to a local farmer (who mixes the milk with feed for
livestock) for \$2 per case. If there is a shortage, the grocer considers the cost of customer ill will and lost profit to be \$4 per case.
The grocer must decide how many cases of milk to order each week.
a. Construct the payoff table for this decision situation.
b. Compute the expected value of each alternative amount of milk that could be stocked and select the best decision.
c. Construct the opportunity loss table and determine the best decision.
d. Compute the expected value of perfect information.
4-
Carol Latta is visiting hotels in Los Angeles to decide where to hold a convention for a national organization of college business
school teachers she represents. There are three hotels from which to choosethe Cheraton, the Milton, and the Harriott. The
criteria she is to use to make her selection are ambiance, location (based on safety and walking distance to attractions and
restaurants), and cost to the organization. Following are the pairwise comparisons she has developed that indicate her
preference for each hotel for each criterion and her pairwise comparisons for the criteria:
Ambiance
Hotel
Cheraton
Milton
Harriott
Cheraton
1
1/2
1/5
Milton
2
1
1/3
Harriott
5
3
1
Cheraton
Milton
Harriott
1
5
3
Milton
1/5
1
1/4
Harriott
1/3
4
1
Cheraton
Milton
Harriott
1
2
5
Milton
1/2
1
2
Harriott
1/5
1/2
1
Criterion
Ambiance
Location
Cost
Ambiance
1
2
4
Location
1/2
1
3
Cost
1/4
1/3
1
Location
Hotel
Cheraton
Cost
Hotel
Cheraton
Develop an overall ranking of the three hotels, using AHP, to help Carol Latta decide where to hold the meeting. (only test
of consistency for cost.)
5-