Situation no.

37

A retailer is deciding how many units of a certain product to stock. The historical probability
distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The
product costs $8 per unit and sells for $25 per unit. What is the conditional value for the decision
alternative "Stock 3" and state of nature "Sell 1"?

State of nature
Sell 1
Alternative Stock 3

In case of stock 3, and sell 1, the conditional value will be :-

( 1 * 25 ) – ( 3 * 8 ) = 25 – 24 = $ 1