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Unit No.3.
DECISION SCIENCE
Presented By:
Dr. V. M. Tidake
Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem)
Dean, EDP & Associate Professor MBA
1
Sanjivani College of Engineering, Kopargaon
Department of MBA
www.sanjivanimba.org.in
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302-DECISION SCIENCE
Unit No.3. Decision Theory
3.10 Case 5 Decision
Theory
Presented By:
Dr. V. M. Tidake
Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem)
Dean EDP & Associate Professor MBA
2
Sanjivani College of Engineering, Kopargaon
Department of MBA
www.sanjivanimba.org.in
4. www.sanjivanimba.org.in
Case 5: Decision Theory
A Major consumer goods manufacturer, wishes to decide which of the two new
products to bring out in the market and what level of advertising to use. The profit
tables for these products are as follows (Profits are in Rs. 10,000)
The Probability Distribution of demand are-
a. Which Product and Advertising Level would you recommend?
b. What is the expected value of perfect information for each product?
Ozone Life
Demand A1 Low
Ad
A2 Med.
Ad.
A3 High
Ad.
A1 Low
Ad.
A2 Med.
Ad
A3 High
Ad.
S1 High 140 160 200 200 210 230
S2 Average 100 130 160 160 170 190
S3 Low 80 120 140 120 130 140
Si Ozone P(Si) Life P(Si)
S1 0.4 0.2
S2 0.5 0.2
S3 0.1 0.6
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Case 4: Decision Theory
Let,
N0- State that the demand is 0
N1- State that the demand is 1
N2- State that the demand is 2
N3- State that the demand is 3
And,
S0- Strategy of Stocking 0 Units
S1- Strategy of Stocking 1 Units
S2- Strategy of Stocking 2 Units
S3- Strategy of Stocking 3 Units