The Alternatives 1 and 2 in the Following Payoff Table

question 81

Multiple Choice

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt.The level of demand affects the success of both strategies.The states of nature (S₁) represent the levels of demand for the company products.S₁,S₂ and S₃ characterize high,medium and low demand with probabilities of .3,.6 and .1 respectively.The payoff values are in thousands of dollars. The management believes that the weather conditions significantly affect the level of demand.48 monthly sales reports are randomly selected.These monthly sales reports showed 15 months with high demand,28 months with medium demand,and 5 months with low demand.12 of the 15 months with high demand had favorable weather conditions.14 of the 28 months with medium demand had favorable weather conditions.Only 1 of the 5 months with low demand had favorable weather conditions.What is the maximum amount that the company would be willing to pay for perfect information?

• A)$95,000
• B)$112,000
• C)$7,000
• D)$24,000
• E)$17,000

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Definitions:

Meganational Strategy

Strategic approaches adopted by corporations to optimize their operations and market presence on a global scale, leveraging multinational presence.

Standardized Platform

A uniform technological base or set of guidelines adopted across different systems to ensure compatibility, efficiency, and consistency in operations or services.

Handicraft Shops

Retail outlets specializing in the sale of handmade goods, often emphasizing traditional or cultural craftsmanship.

Secure Payment System

A transaction method designed to protect the personal and financial information of the buyer through encryption and security measures.