A logistics provider plans to have a new warehouse built to handle increasing demands for its services Although the company is

Question

A logistics provider plans to have a new warehouse built to handle increasing demands for its services Although the company is unsure of how much demand there will be it must decide now on the size large or small of the warehouse Preliminary estimates are that if a small warehouse is built and demand is low the monthly income will be 700 000 If demand is high it will have to either expand the facility or lease additional space Leasing will result in a monthly income of 100 000 while expanding will result in a monthly income of 500 000 If a large warehouse is built and demand is low monthly income will only be 40 000 while if demand is high monthly income will be 2 million Using a tree diagram identify the choice that would be made using each of the four approaches for decision making under uncertainty a Maximin O Small warehouse O Large warehouse b Maximax O Large warehouse OSmall warehouse c Laplace Assume the probabilities of low and high demand to be 50 each OSmall warehouse O Large warehouse d Minimax regret

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