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ABC Company, a soft-drink vendor, has created a table of payoffs for three stocking decisions for three different states of nature:
States of nature (Demand)
Alternatives Heavy Medium Low
Large stock $2,060 $1,510 $1,200
Average stock $1,390 $1,430 $1,290
Small stock $1,560 $1,550 $1,890
Probabilities associated with the states of nature are 0.4 for heavy demand, 0.2 for medium demand, and 0.4 for low demand. What is the expected value with perfect information? Specify only the amount. e.g. 14000
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Why is forecasting important in organizations, especially as related to understanding the relevant time horizon to develop a forecast against? What are some examples from industry?
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