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    Isher Singh
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    Internat Corporation wants to choose the optimal location to open a new manufacturing facility to serve the global market. The document provides a table with potential profit figures for plant locations in the US, Ireland, Spain, and Japan under three different exchange rate scenarios. It asks to determine the optimal location using maximax, maximin, Laplace, and minimax regret decision criteria. The problem is then modified to focus on determining the optimal capacity for a new production facility, given three possible future demand levels and the profits associated with three capacity alternatives. It provides a new payoff matrix and asks to determine the optimal capacity using the same decision criteria.

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    Deciision making under risk

    Original Title

    Decision making

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    Internat Corporation wants to choose the optimal location to open a new manufacturing facility to serve the global market. The document provides a table with potential profit figures for plant locations in the US, Ireland, Spain, and Japan under three different exchange rate scenarios. It asks to determine the optimal location using maximax, maximin, Laplace, and minimax regret decision criteria. The problem is then modified to focus on determining the optimal capacity for a new production facility, given three possible future demand levels and the profits associated with three capacity alternatives. It provides a new payoff matrix and asks to determine the optimal capacity using the same decision criteria.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    6 views2 pages

    Decision Making

    Uploaded by

    Isher Singh
    Internat Corporation wants to choose the optimal location to open a new manufacturing facility to serve the global market. The document provides a table with potential profit figures for plant locations in the US, Ireland, Spain, and Japan under three different exchange rate scenarios. It asks to determine the optimal location using maximax, maximin, Laplace, and minimax regret decision criteria. The problem is then modified to focus on determining the optimal capacity for a new production facility, given three possible future demand levels and the profits associated with three capacity alternatives. It provides a new payoff matrix and asks to determine the optimal capacity using the same decision criteria.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Original Problem

    Internat Corporation wants to open a new manufacturing facility to serve the


    world market.The companys economists have identified plant sites and the
    profits associated as follows:
    Plant location

    Exchange rate scenarios


    1

    3
    U.S.
    Ireland
    Spain
    Japan

    22
    18
    12
    5

    13
    16
    19
    12

    7
    15
    13
    25

    Value in million dollars $


    Determine the optimal plant location using the following decision criteria: (i)
    maximax, (ii) maximin
    (iii) Laplace (iv) minimax regret.
    Modified Problem
    Suppose a company wants to construct a facility to produce a new product but it
    must decide how large the capacity should be. For each capacity alternative the
    profitability of the plant will depend on the future product. Suppose the company
    believes there are three levels of demand possible given in the payoff matrix.
    Capacity
    Alternative

    Low

    Possible future Demand


    Moderate

    High
    200,000/yr
    400,000/yr
    600,000/yr
    Value in million dollars $

    4.0
    1.5
    2.0

    4.5
    7.0
    5.0

    4.5
    7.5
    12.0

    Determine the optimal capacity for different decision criteria?


    Answer
    Capacity
    Best Payoff
    Alternative
    Average Payoff
    200,000/yr
    4.5
    400,000/yr
    7.5
    600,000/yr
    12.0*
    *Maximax optimum=12.0
    Maximin optimum=4.0
    Laplace optimum=5.50
    Capacity
    Alternative
    200,000/yr

    Worst Payoff
    4.0
    1.5
    2.0

    4.33
    5.50
    5.00

    Maximum Regret
    7.5

    Page No. 319 PRODUCTION AND OPERATIONS MANAGEMENT BY JOSEPH


    S.MARTINICH

    400,000/yr
    600,000/yr
    `` Minimax regret optimum=4.5

    4.5``
    6.0

    Page No. 319 PRODUCTION AND OPERATIONS MANAGEMENT BY JOSEPH


    S.MARTINICH

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