excel

Bob’s Bike Shop can expand his current shop, move to a larger location, or make no change.

 

With a good market, the payoff is $ 56,000 if he expands, $ 70,000 if he moves, and $ 30,000 if he does nothing.

 

With an average market, his payoffs will be $ 21,000, $ 35,000 and $ 10,000 respectively.

  

With a poor market, his payoffs will be – $ 29,000 (loss), – $ 45,000 (loss) and $ 5,000 (profit) respectively.

DM2 Bike Shop

Bob’s Bike Shop can expand his current shop, move to a larger location, or make no change.

With a good market, the payoff is $ 56,000 if he expands, $ 70,000 if he moves, and $ 30,000 if he does nothing.

With an average market, his payoffs will be $ 21,000, $ 35,000 and $ 10,000 respectively.

With a poor market, his payoffs will be – $ 29,000 (loss), – $ 45,000 (loss) and $ 5,000 (profit) respectively.

Step 1.

Create a table in excel showing this information is a grid (see pages 361,362).

Label everything clearly. Label this worksheet ORIGINAL.

Step 2.

Now copy this table 5 times to 5 different worksheets.

Call the tabs – MAXIMAX – MAXIMIN – HURWICZ – LAPLACE – MINIMAX REGRET

In each of the tabs, calculate the answer.

In the MAXIMAX tab, you will indicate which decision would be selected based on the MAXIMAX strategy.

Use EXCEL formulas (see page 364)

** On the FINAL exam, you will need to manually calculate these values and to recognize the EXCEL.

In the MAXIMIN tab, you will indicate which decision would be selected based on the MAXIMIN strategy.

Use EXCEL formulas.

In the LAPLACE tab, use EXCEL to calculate your values.

In the HURWICZ tab, use alpha as 0.6. Use Excel to calculate your values.

In the MINIMAX REGRET, you need to show me the REGRET table and which decision you are choosing. Use Excel.

Call this file DM2 (your name).

Hint:

3 methods recommend MOVE

MINIMAX REGRET recommends EXPAND

ONLY ONE method recommends NO CHANGE