1. Penny's problem is to decide how large her Consulting firm should be. The annual return depends on both the size of her consulting firm and a number of marketing factors. After a careful analysis, Penny developed the following table: SIZE (Consulting firm) GOOD MARKET AVERAGE POOR MARKET MARKET SMALL 95,000 25000 -40000 MEDIUM 1,00,000 37500 -60000 LARGE 120000 50000 -110000 a. What is the best decision of Penny as per criteria of realism? What is the EMV of that best decision (Assume a = 0.7) b. What is the best decision of Penny as per minimax regret criterion? What is the EMV of that best decision? [Clearly write down the intermediate Opportunity Loss Table(s) forthis part]

1. Penny's problem is to decide how large her Consulting firm should be. The annual return depends on both the size of her consulting firm and a number of marketing factors. After a careful analysis, Penny developed the following table: SIZE (Consulting firm) GOOD MARKET AVERAGE POOR MARKET MARKET SMALL 95,000 25000 -40000 MEDIUM 1,00,000 37500 -60000 LARGE 120000 50000 -110000 a. What is the best decision of Penny as per criteria of realism? What is the EMV of that best decision (Assume a = 0.7) b. What is the best decision of Penny as per minimax regret criterion? What is the EMV of that best decision? [Clearly write down the intermediate Opportunity Loss Table(s) forthis part]

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 3E

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