Greentrop Pharmaceutical Products are the world leader in the area of sleep aids. Its major product is "Dozealot". The Research-and-Development Division has defined two alternatives to improve the quality of the product. These alternatives are simple reformulations of the product to minimize the side effects and to improve the product efficacy. To conduct an analysis, management has decided to consider the possible demands for the drug under each alternative. The following payoff table shows the projected profit in millions of dollars.
$$\begin{array} { | l | l | l | l | }
\hline & { \text { Demand } } \
\hline \text { Decision Alternatives } & \text { Low } & \text { Medium } & \text { High } \
\hline d _ { 1 } & \$ 500 & \$ 350 & \$ 525 \
\hline d _ { 2 } & \$ 875 & \$ 300 & \$ 765 \
\hline
\end{array}$$
a. Construct a decision tree for this problem.
b. If the decision maker knows nothing about the probabilities of three states of nature, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

Question

Greentrop Pharmaceutical Products are the world leader in the area of sleep aids. Its major product is "Dozealot". The Research-and-Development Division has defined two alternatives to improve the quality of the product. These alternatives are simple reformulations of the product to minimize the side effects and to improve the product efficacy. To conduct an analysis, management has decided to consider the possible demands for the drug under each alternative. The following payoff table shows the projected profit in millions of dollars.
​ $$\begin{array} { | l | l | l | l | } 
\hline &  { \text { Demand } } \
\hline \text { Decision Alternatives } & \text { Low } & \text { Medium } & \text { High } \
\hline d _ { 1 } & \$ 500 & \$ 350 & \$ 525 \
\hline d _ { 2 } & \$ 875 & \$ 300 & \$ 765 \
\hline
\end{array}$$ 
a. Construct a decision tree for this problem.
b. If the decision maker knows nothing about the probabilities of three states of nature, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

Quizplus · Accepted Answer

The Answer of Greentrop Pharmaceutical Products are the world leader in the area of sleep aids. Its major product is "Dozealot". The Research-and-Development Division has defined two alternatives to improve the quality of the product. These alternatives are simple reformulations of the product to minimize the side effects and to improve the product efficacy. To conduct an analysis, management has decided to consider the possible demands for the drug under each alternative. The following payoff table shows the projected profit in millions of dollars.
​ $$\begin{array} { | l | l | l | l | } 
\hline &  { \text { Demand } } \
\hline \text { Decision Alternatives } & \text { Low } & \text { Medium } & \text { High } \
\hline d _ { 1 } & \$ 500 & \$ 350 & \$ 525 \
\hline d _ { 2 } & \$ 875 & \$ 300 & \$ 765 \
\hline
\end{array}$$ 
a. Construct a decision tree for this problem.
b. If the decision maker knows nothing about the probabilities of three states of nature, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

Greentrop Pharmaceutical Products Are the World Leader in the Area