A student group must order hot dogs for a concession stand at a sporting
event. In the past, demand has been 7, 8, 9, or 10 dozen hot dogs for the event,
depending on attendance and the weather. They need to order the hot dogs
and buns the week before the event and will not be able to return any unused
inventory. They purchase the hot dogs and buns for $2 per dozen and sell
them for $6 per dozen.
Fill in the following table to show the net profit (profit minus cost) for
each of the possible order and demand levels: 7, 8, 9, or 10 dozen.
Demand Demand Demand Demand
7 Dozen 8 Dozen 9 Dozen 10 Dozen
order 7 dozen
order 8 dozen
order 9 dozen
order 10 dozen
Find what size order a pessimistic decision maker would place.
Find what size order an optimistic decision maker would place.
What size order would you place if you knew from past experience that
each demand level is equally likely?
The expert examines pessimistic and optimistic decision makers.