A Manager Is Deciding Whether or Not to Build a Small

question 10

Essay

A manager is deciding whether or not to build a small facility.Demand is uncertain and can be either at a high or low level.If the manager chooses a small facility and demand is low, the payoff is $100.If the manager chooses a small facility and demand is high, the payoff is $300.On the other hand, if the manager chooses a large facility and demand is low, the payoff is -$200, but if demand is high, the payoff is $800.
(a)What would be the best decision based on the Laplace criterion?
(b)What would be the best decision based on Hurwicz's criterion of realism using α = 0.6?

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Definitions:

Department Store Branch

A subsidiary location of a larger department store company, offering a range of merchandise and services similar to the main store but located in different areas.

Population of Consumers

The total group of individuals who are potential or actual buyers of a product or service within a given market.

Regional Shopping Center

A large retail complex that provides a wide range of goods and services, serving not only the local community but also attracting customers from a broader region.

Psychological Attributes

Characteristics or features of a product or service that influence the mental state or emotional response of consumers.