What is variance of loss due to lack of processing capacity

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Reference no: EM131375555

Refer to Review given Problem. LOTell is happy with the decision recommendation suggested by the previous decision tree analysis considering information on market growth. However, LOTell feels that the uncertainty in market growth is the most important factor in the overall decision regarding the introduction of the internet service package. Hence, they wish to examine the sensitivity of the probability estimates for the market growth. Answer the following questions on the basis of the decision tree developed for Review given Problem.

(a) Let p\ be the probability of rapid market growth, pi be the probability of steady growth, and pi be the probability of slow market growth. Express the expected value at Node 2, EV(2), in terms oip\,pi, and/);.

(b) If EY(2)

(a) is not involved.) Wha t can you observe from the graph regarding the values of p i and p2 ?

Problem :
Rockies Adventure Wear, Inc., sells athletic and outdoor clothing through catalogue sales. Its managers want to upgrade their order-processing centre so that thev have less chance of losing customers by putting them on hold. The upgrade may result in a processing capacity of 30, 40, 50, or 60 calls per hour with the probabilities of 0.2, 0.4, 0.3, and 0.1, respectively. Alarket research indicates that the average number of calls that Rockies may receive is 50 per hour.

(a) How many customers are expected to be lost per hour due to the lack of processing capacity?

(b) What is the variance of the loss due to the lack of processing capacity?

Reference no: EM131375555

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