Page 417 - PM Integrated Workbook 2018-19

Answers

Example 5

Following up from the pay-off table example, Geoffrey’s Ramsbottom’s table
looks as follows:

Daily supply
40 50 60 70
Probability
salads salads salads salads
40 salads 0.10 $80 $0 $(80) $(160)
Daily
demand 50 salads 0.20 $80 $100 $20 $(60)
60 salads 0.40 $80 $100 $120 $40

70 salads 0.30 $80 $100 $120 $140

How many salads should we supply, using the maximin rule?

If we decide to supply 40 salads, the minimum pay-off is $80.

If we decide to supply 50 salads, the minimum pay-off is $0.

If we decide to supply 60 salads, the minimum pay-off is ($80).

If we decide to supply 70 salads, the minimum pay-off is $(160).

The highest minimum payoff arises from supplying 40 salads.

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