Outcome Frequency

x f p(x) x.p(x)
2 24 0.2823529 0.5647059
4 22 0.2588235 1.0352941
6 16 0.1882353 1.1294118
8 12 0.1411765 1.1294118
10 7 0.0823529 0.8235294
12 3 0.0352941 0.4235294
15 1 0.0117647 0.1764706
85 5.2823529 EXPECTED VALUE
x p(x) x.p(x)
8000 0.05 400
9000 0.15 1350
10000 0.25 2500
11000 0.3 3300
12000 0.2 2400
13000 0.05 650
1 10600 EXPECTED VALUE
 x p(x) x.p(x)
0 0.35 0
50 0.25 12.5
100 0.15 15
150 0.1 15
200 0.08 16
250 0.05 12.5
300 0.02 6
1 77

SO JIM SHOULDN'T PAY $100 FOR MAINTENANCE

No. of Accidents Frequency
x f p(x) x.p(x)
0 1 0.0416667 0
2 1 0.0416667 0.0833333
3 1 0.0416667 0.125
4 2 0.0833333 0.3333333
6 1 0.0416667 0.25
7 3 0.125 0.875
8 5 0.2083333 1.6666667
9 2 0.0833333 0.75
10 5 0.2083333 2.0833333
12 2 0.0833333 1
14 1 0.0416667 0.5833333
24 7.75
MR OPSINE SHOULD RECOMMEND AN INSTALLATION
TRUCK DIVISION AIRLINE DIVISION
LETTERS LOST FREQUENCY LETTERS LOST FREQUENCY
x f p(x) x.p(x) x f p(x)
0 1 0.0833333 0 0 2 0.1666667
1 2 0.1666667 0.1666667 1 1 0.0833333
2 2 0.1666667 0.3333333 2 2 0.1666667
3 2 0.1666667 0.5 3 1 0.0833333
4 2 0.1666667 0.6666667 4 3 0.25
5 2 0.1666667 0.8333333 5 1 0.0833333
6 0 0 0 6 1 0.0833333
7 1 0.0833333 0.5833333 7 1 0.0833333
12 3.0833333 12

HE SHOULD INVESTIGATE AIRPLANE DIVISION.

 x.p(x)
0
0.0833333
0.3333333
0.25
1
0.4166667
0.5
0.5833333
3.1666667
 BUILDING A LOSS MATRIX

STATES OF NATURE
25000 40000 55000 70000
PROBABILITY 0.1 0.3 0.45 0.15
ACTION CP 0.25
25000 0 15000 30000 45000 SP 1.25
40000 3750 0 15000 30000 OVERSTOCK 0.25
55000 7500 3750 0 15000 UNDERSTOCK 1
70000 11250 7500 3750 0

E[LOSS] FOR 25000 E[LOSS] FOR 40000 E[LOSS] FOR 55000

x p(x) x.p(x) x p(x) x.p(x) x
0 0.1 0 3750 0.1 375 7500
15000 0.3 4500 0 0.3 0 3750
30000 0.45 13500 15000 0.45 6750 0
45000 0.15 6750 30000 0.15 4500 15000
24750 11625

SO 55000 SHOULD BE CHOOSEN

E[LOSS] FOR 55000 E[LOSS] FOR 70000
p(x) x.p(x) x p(x) x.p(x)
0.1 750 11250 0.1 1125
0.3 1125 7500 0.3 2250
0.45 0 3750 0.45 1687.5
0.15 2250 0 0.15 0
4125 5062.5
1 Revenue generated by releasing all 3 seats now
750

2 Expected net revenue if all 3 seats are released now

= 250*3 - 0.45*0 - 0.30*1*150 - 0.15*2*150 - 0.10*3*150
= 615

3 Expected net revenue if 2 seats are released now

=