3.

0 Assignment Problem Decision Making Model

In pursuing to be top branded international company, REXTA Ltd has to improve the
management and planning. One of the company site located in Liverpool, UK has been given
incentive in developing their site to meet the demand. For that, planner management executive
has given an assignment by site manager’s CEO to come with a proposal in improving the
management planning. Three alternative decisions are being considered; first, renovation the
factory and add more machinery and facilities to produce more product that have highest
customer demand; second, follow the existing planning that been given by last senior of planner
management ; third, subcontract another planner management after divide the profit. The
following payoff table describes this decision situation:

Decision Status of Nature

Good Condition Bad Condition

Renovation $950,000 $650,000

Follow existing $1,450,000 $-160,000

planning

Subcontract $470,000 $470,000

1. Determine the best decision by using the following decision criteria:

a. Maximax
b. Maximin
c. Minimax Regret
d. Hurwicz (α = .3)
e. Equal Likelihood

2. Assume that it is now possible to estimate a probability of 65% that good condition will
exist and a probability of 35% that bad condition will exist. Determine the best decision
by using expected value and expected opportunities loss

3. Compute the expected value of perfect information .

4. Develop a decision tree, with expected value at the probability nodes.

5. Superintendent Planner Management has hired a consulting firm provide a decision

report base on situation that he made. The report will positive or negative, indicating
either a best or bad decision choice for planning these management. The probability of
each report outcome is 0.70 for positive good and 0.20 for positive bad.

Determine the posterior probabilities by using Bayer’s Rule.

6. Perform a decision tree analysis by using the posterior probability obtained in problem
no. 5.