A Company Is About to Develop and Then Market a New

question 62

Essay

A company is about to develop and then market a new product. It wants to build a simulation model for the entire process, and one key uncertain input is the development cost. For each of the scenarios in the questions below, choose an "appropriate" distribution, together with its parameters, and explain your choice.
-(A) Company experts have no idea about the distribution of their development cost. All they can state is that "we are 90% sure it will be somewhere between $450,000 and $650,000."
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(B) Company experts can still make the same two statements as in (A), but now they can also state that "we believe the distribution is symmetric and its most likely value is about $550,000."
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(C) Company experts can still make the same two statements as in (A), but now they can also state that "we believe the distribution is skewed to the right, and its most likely value is about $500,000."

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Definitions:

Ovary

The female reproductive organ in plants and animals where eggs or ovules develop and hormones are produced.

Vulva

The external female genital organs, including the labia majora, labia minora, clitoris, and the openings of the urethra and vagina.

Vagina

The muscular tube leading from the external genitals to the cervix of the uterus in females, part of the female reproductive system.

Fallopian Tube

Part of the female reproductive system, a pair of tubes leading from the ovaries to the uterus, responsible for transporting eggs and the site of fertilization.