Question 1

Demand (in pairs)

0.05 0.075 0.1 0.15 0.2 0.175 0.1 0.075 0.05 0.025 b) Maximax
Decision Alternatives 100 200 300 400 500 600 700 800 900 1000
100 11000 13000 7000 5000 3000 1000 -1000 -3000 -5000 -7000 11000
200 4000 22000 20000 18000 16000 14000 12000 10000 8000 6000 22000
300 -3000 15000 33000 31000 29000 27000 25000 23000 21000 19000 33000
400 -10000 8000 26000 44000 42000 40000 38000 36000 34000 32000 44000
500 -17000 1000 19000 37000 55000 53000 51000 49000 47000 45000 55000
600 -24000 -6000 12000 30000 48000 66000 64000 62000 60000 58000 66000
700 -31000 -13000 5000 23000 41000 59000 77000 75000 73000 71000 77000
800 -38000 -20000 -2000 16000 34000 52000 70000 88000 86000 84000 88000
900 -45000 -27000 -9000 9000 27000 45000 63000 81000 99000 97000 99000
1000 -52000 -34000 -16000 2000 20000 38000 49000 74000 92000 110000 110000 According to Maximax criterion
Pick 1000 units

Regret Table
e) Minimax Regret
Decision Alternatives 100 200 300 400 500 600 700 800 900 1000
100 0 -9000 -26000 -39000 -52000 -65000 -78000 -91000 -104000 -117000 -117000
200 -7000 0 -13000 -26000 -39000 -52000 -65000 -78000 -91000 -104000 -104000
300 -14000 -7000 0 -13000 -26000 -39000 -52000 -65000 -78000 -91000 -91000
400 -21000 -14000 -7000 0 -13000 -26000 -39000 -52000 -65000 -78000 -78000
500 -28000 -21000 -14000 -7000 0 -13000 -26000 -39000 -52000 -65000 -65000
600 -35000 -28000 -21000 -14000 -7000 0 -26000 -39000 -52000 -52000
700 -42000 -35000 -28000 -21000 -14000 -7000 0 -13000 -26000 -39000 -42000 According to Minimax
800 -49000 -42000 -35000 -28000 -21000 -14000 -7000 0 -13000 -26000 -49000 Regret, pick 700 units
900 -56000 -49000 -42000 -35000 -28000 -21000 -14000 -7000 0 -13000 -56000
1000 -63000 -56000 -49000 -42000 -35000 -28000 -28000 -14000 -7000 0 -63000

c) Maximin d) EMV

-7000 3000
4000 14700
-3000 According to Maximin criterion 25200
-10000 Pick 300 units 33700
-17000 39200
-24000 40700 According to
-31000 38700 EMV criterion,
-38000 34700 pick 600 units
-45000 29200
-52000 22000

f) EOL Perfect Information Value:

56650
-53650 EMV:
-41950 40700
-31450 Extra Value:
-22950 15950
-17450
-14650 According to EOL criterion
-17950 Pick 600 units
-21950
-27450
-34650
 0.8
Referendum Passes
0.25 1300000
Wins bid 2200000 1300000

-900000 9E+05 0.2

Ref. doesn’t pass
Bid $900k -650000
250000 -650000
0 227500
0.75
Doesn’t win
0
0 0

0.8
Ref passes
0.45 850000
Wins bid 2200000 850000

-1350000 5E+05 0.2

Ref doesn’t pass
Bid $1.35M -1100000
1 250000 -1100000
227500 0 207000
0.55
Doesn’t win
0
0 0

0.8
Ref. passes
0.85 450000
Wins bid 2200000 450000

-1750000 60000 0.2

Ref. doesn’t pass
Bid $1.75M -1500000
250000 -1500000
0 51000
0.15
Doesn’t win
0
0 0
 0.785714
F
90000
Open 100000 90000

0 55714.29 0.214286
0.7 UF
FRS -70000
1 -60000 -70000
0 55714.29

Don’t open
-10000
0 -10000
Hire
0.1
-10000 36000 F
90000
Open 100000 90000

0 -54000 0.9
0.3 UF
UFRS -70000
2 -60000 -70000
0 -10000

1 Don’t open
36000 -10000
0 -10000

0.5
Tighten Access
-60000
Open -60000 -60000

0 20000 0.5
Liberalize Access
Don't Hire 100000
1 100000 100000
0 20000

Don’t Open
0