dolution

Suppose Sanjay Patel is faced with the following pay-off table. He has to choose how many pizzas to make in advance each day before he knows the actual demand. • His choice is between 40, 50, 60 and 70 pizzas. The actual demand can also vary between 40, 50, 60 and 70 with the probabilities as shown in the table – e.g. P(demand = 40) is 0.1. The table then shows the profit or loss – for example, if he chooses to make 70 but demand is only 50, then he will make a loss of $60. Daily Supply Daily demand Probability 40 pizzas 0.10 50 pizzas 0.20 60 pizzas 0.40 70 pizzas 0.30 40 pizzas $80 $80 $80 50 pizzas 60 pizzas 70 pizzas $0 $(80) $(160) $100 $20 $(60) $100 $120 $40 $100 $120 $140 $80 Show calculations for your answers below: a. Assume that Sanjay is Optimistic, what is the number of pizzas that he should make in advance? b. Assume that Sanjay is Conservative, what is the number of pizzas that he should make in advance? C. Assume that Sanjay is neither optimistic nor conservative, what is the number of pizzas that he should make in advance? d. Assume that Sanjay is using the Expected Opportunity Loss criteria, what is the number of pizzas that he should make in advance? e. What is the Expected Value of Perfect Information that Sanjay would be willing to pay?