10.1 – Sequential decisions: Present an example of a sequence of two or more decisions followed by an uncertainty.
Should we open a bakery or a diner? …show more content…
The current store price is $50. Construct a decision tree to determine whether or not she should buy the dress now or gamble and wait to try to buy it next week if it remains unsold (If she comes back next week and finds the dress has been sold, Laila will buy it online).
Buy now = $50 expected value
Wait = (50% x $60) + (50% x $37.50) = $48.75 expected value, therefore she should wait a week. b) Just before analyzing her decision, she found another place online that sells the same dress for $55. Why might a lower price online affect her purchase decision in this store? This should definitely sway her to decision to wait a week. Should she buy the dress now or gamble and wait to buy it in the second week if available? She should wait and take a …show more content…
These more expensive dresses have only a 30% chance of being sold each week and again they tell the customers that every week they reduce the price buy 25%. She checked and found a similar dress for $90 online. Construct a decision tree for 3 weeks of possible discounts.
10.9 a and d a) Draw a decision tree to determine the number of questions to attempt to maximize expected earnings. What is the best decision and what are the expected earnings? They should stop after two questions to win $2200.00 d) The smart Quiz show is considering changing the reward for answering the third question correctly. Let m represent the amount of money a contestant will earn for correctly answering the third question. Write an equation to calculate the expected value for the last decision as a function of m (assume a 50-50 chance). (2,200 + m) x .5
10.10 b, c, d and e b) Based on your decision tree, do you recommend they bid, and if so, what should they bid per installation? Yes, they should bid $95. c) Under the optimal policy, what is the probability they will win the contract?