Probability Analysis
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m4a2_full_assignment_information.docxA General Manger of Harley-Davidson has to decide on the size of a new facility. The GM has narrowed the choices to two: large facility or small facility. The company has collected information on the payoffs. It now has to decide which option is the best using probability analysis, the decision tree model, and expected monetary value.
Options:
|
Facility |
Demand Options |
Probability |
Actions |
Expected Payoffs |
|
|
|
|
|
|
|
Large |
Low Demand |
0.4 |
Do Nothing |
($10) |
|
|
Low Demand |
0.4 |
Reduce Prices |
$50 |
|
|
High Demand |
0.6 |
|
$70 |
|
|
|
|
|
|
|
Small |
Low Demand |
0.4 |
|
$40 |
|
|
High Demand |
0.6 |
Do Nothing |
$40 |
|
|
High Demand |
0.6 |
Overtime |
$50 |
|
|
High Demand |
0.6 |
Expand |
$55 |
Determination of chance probability and respective payoffs:
|
Build Small: |
|
|
Low Demand |
0.4($40)=$16 |
|
High Demand |
0.6($55)=$33 |
|
|
|
|
Build Large: |
|
|
Low Demand |
0.4($50)=$20 |
|
High Demand |
0.6($70)=$42 |
Determination of Expected Value of each alternative Build Small: $16+$33=$49 Build Large: $20+$42=$62
Click here for the Statistical Terms review sheet.
Submit your conclusion in a Word document to the M4: Assignment 2 Dropbox byWednesday, November 18, 2015.
A General Manger of Harley
-
Davidson has to decide on the size of a new facility. The GM has narrowed
the choices to two: large facility or small facility. The company has collected information on the payoffs. It
now has to decide which option is the best u
sing probability analysis, the decision tree model, and
expected monetary value.
Options:
Facility
Demand
Options
Probability
Actions
Expected
Payoffs
Large
Low Demand
0.4
Do Nothing
($10)
Low Demand
0.4
Reduce Prices
$50
High Demand
0.6
$70
Small
Low Demand
0.4
$40
High Demand
0.6
Do Nothing
$40
High Demand
0.6
Overtime
$50
High Demand
0.6
Expand
$55
A General Manger of Harley-Davidson has to decide on the size of a new facility. The GM has narrowed
the choices to two: large facility or small facility. The company has collected information on the payoffs. It
now has to decide which option is the best using probability analysis, the decision tree model, and
expected monetary value.
Options:
Facility
Demand
Options
Probability Actions
Expected
Payoffs
Large Low Demand 0.4 Do Nothing ($10)
Low Demand 0.4 Reduce Prices $50
High Demand 0.6
$70
Small Low Demand 0.4
$40
High Demand 0.6 Do Nothing $40
High Demand 0.6 Overtime $50
High Demand 0.6 Expand $55
