An Appliance Dealer Must Decide How Many (If Any)new Microwave

question 70

Essay

An appliance dealer must decide how many (if any)new microwave ovens to order for next month.The ovens cost $220 and sell for $300.Because the oven company is coming out with a new product line in two months,any ovens not sold next month will have to be sold at the dealer's half price clearance sale.Additionally,the appliance dealer feels he suffers a loss of $25 for every oven demanded when he is out of stock.On the basis of past months' sales data,the dealer estimates the probabilities of monthly demand (D)for 0,1,2,or 3 ovens to be 0.3,0.4,0.2,and 0.1,respectively.The dealer is considering conducting a telephone survey on customers' attitudes towards microwave ovens.The results of the survey will either be favorable (F),unfavorable (U),or no opinion (N).The dealer's probability estimates for the survey results based on the number of units demanded are: ​
a.What is the dealer's optimal decision without conducting the survey?
b.What is the EVPI?
c.Based on the survey results,what is the optimal decision strategy for the dealer?
d.What is the maximum amount he should pay for this survey?

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Definitions:

Strategic Plan

A long-term, overarching plan of action designed to achieve major goals and objectives within an organization.

Performance Goals

Specific, measurable targets set by an individual or team to achieve desired outcomes within a certain timeframe.

Strategic Intent

Strategic Intent refers to a company's ambitious and focused determination to achieve competitive advantage and operational goals, guiding its strategy and actions.

Competitive Positions

The standing of a company in relation to its competitors in the industry, determined by factors such as market share, product quality, and brand strength.