A bakery must decide how many pies to prepare for the upcomi…

A bakery must decide how many pies to prepare for the upcoming weekend. The bakery has the option to make 50, 100, or 150 pies.  Assume that demand for the pies can be 50, 100, or 150.  Each pie costs $5 to make and sells for $7.  Unsold pies are donated to a nearby charity center.  Assume that there is no opportunity cost for lost sales. Which alternative should be chosen based on the minimax regret criterion?     States of nature   50 100 150 50       100       150      

Bratt’s Bed and Breakfast, in a small historic New England t…

Bratt’s Bed and Breakfast, in a small historic New England town, must decide how to subdivide (remodel) the large old home that will become an inn. There are three alternatives: Option A would modernize all baths and combine rooms, leaving the inn with four suites, each suitable for two to four adults. Option B would modernize only the second floor; the results would be six suites, four for two to four adults, and two for two adults only. Option C (the status quo option) leaves all walls intact. In this case, there are eight rooms available, but only two are suitable for four adults, and four rooms will not have private baths. Below are the details of profit and demand patterns that will accompany each option. Which option has the highest expected value?     Annual profit under various demand patterns   High p Low p A (Modernize all) $90,000 .5 $25,000 .5 B (Modernize 2nd) $80,000 .4 $70,000 .6 C (Status Quo) $60,000 .3 $55,000 .7