Trey Leeman, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. $\begin{array}{r}
\text { Market Demands }\
\begin{array}{|c|c|c|c|}
\hline \text { Alternative } & \text { Low } & \text { Medium } & \text { High } \
\hline \text { Lease New Equipment } & -0.5 & 2 & 4 \
\hline \text { Purchase New Equipment } & -3 & 0.5 & 6 \
\hline \text { Add Third Shift } & 0.5 & 0.75 & 1 \
\hline \text { Do Nothing } & 0 & 0 & 0 \
\hline
\end{array}\end{array}$

If Trey uses the Hurwicz criterion with alpha = 0.1, the appropriate alternative would be: _____________.
A)Lease New Equipment
B)Purchase New Equipment
C)Add Third Shift
D)Do Nothing
E)Do everything

Question

Trey Leeman, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. $\begin{array}{r}
\text { Market Demands }\ 
\begin{array}{|c|c|c|c|}
\hline \text { Alternative } & \text { Low } & \text { Medium } & \text { High } \
\hline \text { Lease New Equipment } & -0.5 & 2 & 4 \
\hline \text { Purchase New Equipment } & -3 & 0.5 & 6 \
\hline \text { Add Third Shift } & 0.5 & 0.75 & 1 \
\hline \text { Do Nothing } & 0 & 0 & 0 \
\hline 
\end{array}\end{array}$

If Trey uses the Hurwicz criterion with alpha = 0.1, the appropriate alternative would be: _____________.
A)Lease New Equipment
B)Purchase New Equipment
C)Add Third Shift
D)Do Nothing
E)Do everything

Quizplus · Accepted Answer

The Hurwicz criterion is a decision-making rule that involves a combination of optimism and pessimism. It uses a coefficient of optimism (alpha) to weigh the best and worst outcomes. With alpha = 0.1, this means Trey is 10% optimistic and 90% pessimistic. For each alternative, calculate the weighted sum of the best and worst payoffs:1. Lease New Equipment: $0.1 \times 4 + 0.9 \times (-0.5) = 0.4 - 0.45 = -0.05$2. Purchase New Equipment: $0.1 \times 6 + 0.9 \times (-3) = 0.6 - 2.7 = -2.1$3. Add Third Shift: $0.1 \times 1 + 0.9 \times 0.5 = 0.1 + 0.45 = 0.55$4. Do Nothing: $0.1 \times 0 + 0.9 \times 0 = 0$The highest value is 0.55 for the "Add Third Shift" alternative, making it the appropriate choice according to the Hurwicz criterion with alpha = 0.1.

Trey Leeman, Operations Manager at National Consumers, Inc If Trey Uses the Hurwicz Criterion with Alpha = 0