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Opportunity Loss

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The concessions manager at our local college baseball game must decide whether to have the vendors sell sun visors or umbrellas. There is a 30% chance of rain, a 15% chance of overcast skies, and a 55% chance of sunshine, according to the weather forecast where the game is to be held. The manager estimates the following profits will result from each decision given each set of weather conditions.

Weather Conditions

Decision Rain .30 Overcast .15 Sunshine .55

Sun visors $-500 $-200 $1,500

Umbrellas $2,000 0 -900

a. I need to compute the expected value for each decision and select the best one.

b. I also need to develop the opportunity loss table and compute the expected opportunity loss for each decision.

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Solution Summary

This solution is comprised of a detailed explanation to compute the expected value for each decision and select the best one.

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  • BSc , Wuhan Univ. China
  • MA, Shandong Univ.
Recent Feedback
  • "Your solution, looks excellent. I recognize things from previous chapters. I have seen the standard deviation formula you used to get 5.154. I do understand the Central Limit Theorem needs the sample size (n) to be greater than 30, we have 100. I do understand the sample mean(s) of the population will follow a normal distribution, and that CLT states the sample mean of population is the population (mean), we have 143.74. But when and WHY do we use the standard deviation formula where you got 5.154. WHEN & Why use standard deviation of the sample mean. I don't understand, why don't we simply use the "100" I understand that standard deviation is the square root of variance. I do understand that the variance is the square of the differences of each sample data value minus the mean. But somehow, why not use 100, why use standard deviation of sample mean? Please help explain."
  • "excellent work"
  • "Thank you so much for all of your help!!! I will be posting another assignment. Please let me know (once posted), if the credits I'm offering is enough or you ! Thanks again!"
  • "Thank you"
  • "Thank you very much for your valuable time and assistance!"
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