A fish market sells fresh fish and seafood. The market receives daily shipments of farm-raised trout from a nearby supplier. Each trout costs $2.65 and is sold for $3.45. To maintain its reputation for freshness, at the end of the day the market sells any leftover trout to a local pet food manufacturer for $1.05 each. The owner of the market wants to determine how many trout to order each day. Historically, the daily demand for trout is:
Demand 10 11 12 13 14 15 16 17 18 19 20
Probability 0.02 0.06 0.09 0.11 0.13 0.15 0.18 0.11 0.07 0.05 0.03
(b)
What decision should be made according to the maximin decision rule? That is, how many trout should be ordered?
(c)
What decision should be made according to the minimax regret decision rule? That is, how many trout should be ordered?
(d)
What decision should be made according to the EMV decision rule? That is, how many trout should be ordered?
(e)
What decision should be made according to the EOL decision rule? That is, how many trout should be ordered?
(f)
At most, how much should the owner of the market be willing to pay (in dollars) to obtain a demand forecast that is 100% accurate? (Round your answer to the nearest cent.
g) Suppose that the market receives a quantity discount that reduces the price to $2.45 per trout if it purchases 15 or more. Using the EMV decision rule, how many trout would you recommend the owner of the fish house order each day in this case?