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Influence Diagrams, Decision Trees and Optimistic, Conservative, and Minimax Regret Approaches

3. Southland Corporation's decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing has decided to view the possible long-run demand as either low, medium, or high. The following payoff table shows the projected profit in millions of dollars:

Long-Range Demand
Plant Size Low Medium High
Small 150 200 200
Large 50 200 500

a. What is the decision to be made, and what is the chance event for Southland's problem?
b. Construct an influence diagram.
c. Construct a decision tree.
d. Recommend a decision based on the use of the optimistic, conservative, and minimax regret approaches.

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3. Southland Corporation's decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing has decided to view the possible long-run demand as either low, medium, or high. The following payoff table shows the projected profit in millions of dollars:

Long-Range Demand
Plant ...

Solution Summary

Influence diagrams, decision trees and optimistic, conservative, and minimax regret approaches are investigated.

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