Question
Question 1. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract i...
Question 1. A plant manager is considering buying additional stamping machines to
accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3
machines. The profits realized under each alternative are a function of whether their bid for a
recent defense contract is accepted or not. The payoff table below illustrates the profits realized
(in $000's) based on the different scenarios faced by the manager.
Alternative Bid Accepted Bid Rejected
Buy 1 machine $10 $5
Buy 2 machine $30 $4
Buy 3 machine $40 $2
Using the information above, which alternative should be chosen based on the maximax
criterion?
Buy 1 machine
Buy 2 machines
Buy 3 machines
Question 2. A plant manager is considering buying additional stamping machines to
accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3
machines. The profits realized under each alternative are a function of whether their bid for a
recent defense contract is accepted or not. The payoff table below illustrates the profits realized
(in $000's) based on the different scenarios faced by the manager.
Alternative Bid Accepted Bid Rejected
Buy 1 machine $10 $5
Buy 2 machines $30 $4
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