Question:Myrtle Air express decided to offer direct service from
Cleveland to Myrtle Beach. Management must decide...
Question
Myrtle Air express decided to offer direct service from
Cleveland to Myrtle Beach. Management must decide...
Myrtle Air express decided to offer direct service from
Cleveland to Myrtle Beach. Management must decide between a
full-price service using the company’s new fleet of jet aircraft
and a discount service using smaller capacity commuter plans. It is
clear that the best choice depends on the market reaction to the
service Myrtle Air offers. Management developed estimates of the
contribution to profit for each type of service based upon two
possible levels of demand for service to Myrtle Beach: strong and
weak. The following table shows the estimated quarterly profits (in
thousands of dollars):
Type of Service
Strong
Weak
Full Price
$960
-$490
Discount
$600
$400
What is the decision to be made, what is the chance event, and
what is the consequence for this problem? How many decision
alternatives are there? How many outcomes are there for the chance
event?
If nothing is known about the probabilities of the chance
outcomes. What is the recommended decision using the optimistic,
conservative, and minimax regret approaches?
Suppose that management of Myrtle Air Express believes that the
probability of strong demand is 0.7 and the probability of weak
demand is 0.3. Use the expected value approach to determine an
optimal decision.
Suppose that the probability of strong demand is 0.8 and the
probability of weak demand is 0.2. Use the expected value approach
to determine an optimal decision.