DECISION THEORY

DECISION THEORY PROBLEM # 1:

 As a gamer, you once desired to become a successful computer shop owner so

that you could earn profit while at the same time be able to bond with fellow
gamers. Now that you a decent amount of savings, you are planning whether you
should invest your money to build either a small, a medium, or a large computer
shop. Given the pay-off table below and the probabilities of each state of nature,
identify the best alternative to pick among these options.

MANUAL COMPUTATIONS:

EMV ( Small Computer Shop )=0.35 ( P 20 ) +0.40 ( P20 )+ 0.25 ( P 20 ) =P20

EMV ( Medium Computer Shop )=0.35 ( P 14 ) +0.40 ( P 24 ) +0.25 ( P 24 ) =P20.50 (Best )
EMV ( LargeComputer Shop ) =0.35 ( P 6 )+ 0.40 ( P 12 ) +0.25 ( P 48 )=P 18.90

ANSWER:

Medium Computer Shop EMV > Small Shop EMV > Large Shop EMV

 Now that you have a decent amount of savings, you should invest your money in
building a medium computer shop because it yields the highest EMV
(Expected Monetary Value) compared to the other alternatives. Thus, it is the
best option to pick.
DECISION THEORY PROBLEM # 2:

 As a toy enthusiast and hardcore action figure collector, it was one of your
dreams to be able to run your very own prestigious toy store one day. Once
again, now that you have saved a decent amount of money, you are planning
whether you should invest your hard-earned cash to build either a small, a
medium, or a large toy store. Given the pay-off table below and the probabilities
of each state of nature, identify the best alternative to pick among these options.

MANUAL COMPUTATIONS:

EMV ( Small Toy Store )=0.40 ( P 30 ) +0.30 ( P30 )+ 0.30 ( P 30 )=P 30

EMV ( Medium Toy Store )=0.40 ( P 21 )+ 0.30 ( P 48 ) +0.30 ( P 48 )=P 37.20
EMV ( LargeToy Store ) =0.40 ( P 8 )+ 0.30 ( P 22 ) +0.30 ( P 96 )=P 38.60(Best)

ANSWER:

Large Toy Store EMV > Medium Toy Store EMV > Small Toy Store

 Now that you have saved a decent amount of money, you should invest your
hard-earned cash in building a large toy store because it yields the highest
EMV (Expected Monetary Value) compared to the other alternatives. Thus, it is
the best option to pick.
SINGLE SERVER: CONSTANT SERVICE TIME

PROBLEM # 1:
Happy Land is a well-known theme park. Inside that theme park is a popular solo roller
coaster ride that provides a constant service time of 5 minutes per customer. That roller
coaster ride also has a customer arrival rate of 10 customers per hour.
Determine the following:

 Utilization rate
10Customers
λ=
1 Hour
1 Customer 12 Customers
μ= =
5 Minutes 1 hour
λ 10Customers per Hour 5
p= = =
μ 12Customers per Hour 6
p=0.8333∨83.33 % Utilized

 Idle Rate
P0=100 %− p=100 %−83.33 % Utilized
P0=16.67 % Idle

 Average number of customers in the queue

λ
2
( 10 )2 25
Lq= = = Customers
2 μ ( μ−λ ) 2 ( 12 )( 12−10 ) 12
Lq=2.0833Customers ∈theQueue on Average

 Average number of customers in the system

λ 25 10 Customers per Hour 35
Ls=Lq+ = Customers+ = Customers
μ 12 12 Customers per Hour 12
Ls=2.9167 Customers∈the System on Average

 Average waiting time of customers in the queue

25
Customers
Lq
Wq= =
12 5
= ∨0.2083 Hours x
λ 10Customers / Hour 24 (
60 Minutes 25
1 Hour )
= Minutes
2
W q=12.50 Minutes Average Waiting Time∈the Queue

 Average waiting time of customers in the system

1 5 1 7
Ws=Wq + = Hours+ = ∨0.2917 Hours x
μ 24 12 24 (
60 Minutes 35
1 Hour )
= Minutes
2
 Ws=17.50 Minutes Average Waiting Time ∈the Syste m
PROBLEM # 2
Happy Sparadise is a spa and massage center with one server. A server serves one
customer at a time with a constant service time of 20 minutes per customer. Happy
sparadise also has a customer arrival rate of 2 customers per hour.
Determine the following:

 Utilization rate
2Customers
λ=
1 Hour
1 Customer 3 Customers
μ= =
20 Minutes 1 Hour
λ 2Customers per Hour
p= =
μ 3 Customers per Hour
p=0.6667∨66.67 % Utilized

 Idle Rate
P0=100 %− p=100 %−66.67 % Utilized
P0=33.33 % Idle

 Average number of customers in the queue

λ
2
( 2 )2 2
Lq= = = Customers
2 μ ( μ−λ ) 2 ( 3 ) ( 3−2 ) 3
Lq=0.67 Customers∈the Queue on Average

 Average number of customers in the system

λ 2 2 Customers per Hour 4
Ls=Lq+ = Customers+ = Customers
μ 3 3 Customers per Hour 3
Ls=1.33Customers ∈the System on Average

 Average waiting time of customers in the queue

2
Customers
Lq
Wq= =
3
λ 2Customers / Hour 3
1
= ∨0.3333 Hours x (
60 Minutes
1 Hour )
=20 Minutes

Wq=20 Minutes Average Waiting Time ∈the Queue

 Average waiting time of customers in the system

1 1 1 2
Ws=Wq + = Hours+ = ∨0.6667 Hours x
μ 3 3 3 ( 1 Hour )
60 Minutes
=40 Minutes

Ws=40 Minutes Average Waiting Time∈the Systme