The Newsboy problem:WinQSB Implementation
The following information is provided for a Newsboy problem. Buy a paper for 10 cents,sell a paper for 25 cents,and lost sale (customer) 12c. Probability of having two to five customers is 0.1, 0.3, 0.4, and 0.2respectively.
a) Create the return table (show details of some of your calculations) and use all the possible decision making methods. Indicate what will be your decision based on each method.
b) Create the regret table (show details of some of your calculations) and use all the possible decision making methods. Indicate what will be your decision based on each method.
c) Create the utility table for a risk indifferent (neutral) person (show details of some of your calculations) and use expected utility method. Indicate what will be your decision.
d) Form a summary table listing all different methods used in parts (a), (b), and (c) with your final decision for each one. Comment on the results in this table. How and why your decision varies based on the different methods.
Run the program module for "Decision Analysis" of WinQSB. Select "New problem" from the pull down menu of "File" in the menu bar. Make the entries as in the Display 1.
Display 1: Initial Information Entry
Change the name of decisions and state of the nature to fit this problem. You can do so by selecting appropriate options ("State of the Nature Name", and "Decision Alternative Name") of the pull down menu of "Edit" in the menu bar. Then enter the problem data as in the Display 2. Save the problem.
Display 2: Problem Data Entry
Select the "Solve and Analysis" option in the menu bar. A window will appear, accept all the default selections, and then click on OK. The software will solve the problem and provides a summary of all decisions made using different criterion as in Display 3.
You can select three more options from the pull down menu of "Results" in the menu bar. These selections will provide you with details of payoff analysis using different criteria (Display 4), regret table calculations (Display 5), and a decision tree graph. Notice that if you select decision tree, a window (Decision Tree Setup) will appear that provides you options for how you would like the tree to look like (Display 6). Make sure you play around with it for different configurations. Then Display 7 will appear and you can print it out.
Display 6: Specification of Decision Tree Graph.
Display 7: Decision Tree Graph