There is no x and y axis – we are not drawing a graph 🙂 You can set up the table any way you want – there is no concept involved in setting up the table. The concept you are being tested on his how we make the decision – not how the table is set up.

This is the worst time i have ever have to replay this particular page just to understand the rules. The normal customers , what rules or basis are you selecting the normal customers. Choice Demands are 400 500 700 900 300 500 700 or 800

Now the first choice 300u was picked up at a profit of $3 = 1500 Normal demand was 400u @ $5. = 2000 Total $2900 The second choice was 500u @ profit of $3. = 1500 Now is my biggest problem is What is the normal demand to get our total units and profit The third choice was 700u @ $3 = 2100 What is the next normal demand to give us the total profit and total units, You choose 500 which was the second normal demand according to the questions …… please i need help as this is driving my head so crazy.

I am not quite sure what you are asking. We need to calculate the profit from all 16 combinations of possible contract sizes and possible normal demands. I shows the workings for 3 of them in full and then filled in the rest.

What may be causing your problem is that whatever happens we must make the contact units. Also, since the maximum we can make is 1,200 units, we can only sell a maximum of whatever is left after supplying the contract to the normal customers.

So, for example, if we sign a contract for 700 units, then the most we can supply to normal customers is 500 units (even if they actually demand 700 or 900 units).

Can you please explain why you used 400 units for normal demand ? I understand the choice for 300 units, but the normal demand part is still unclear for me. If I didn’t know the answer I would probably multiply the normal demand level to the probability, because there is no 100% guarantee that 400 units will be sold. Thank you in advance 🙂

I assume that you have downloaded the free lecture notes that go with the lectures, in which case we know that the normal demand will be either 400, 500, 700 and 900. You are quite right in saying that there is no guarantee that 400 will be sold – again, it will be either 400, 500, 700 or 900 that will be sold, and we therefore calculate what the profit will be for each of those 4 possible outcomes. Then we apply the relevant rule (depending on whether we are using maximin, maximax, expected values, or minimax regret).

Question (a).. calculating all possible profits? What is the reason for adding the 2 profits from Contract size and uncertain demand? As the per contract,if there is guaranteed sales, there shd be no uncertain demand arising… please correct me if Im wrong?

In the third lecture on Chapter 10 (there are 5 lectures in total).

If you listen carefully to what I say in the lecture on this page, I say that I will do expected values last (and you will find the reason when you come to the lecture later on perfect knowledge).

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loukasierides says

Dear Sir,

just to be clear, at 19:46 did you mean to write 3400?

loukasierides says

oh sorry, how stupid of me, my mistake, please ignore

John Moffat says

No problem 🙂

usama44 says

selling price is 11 and fixed price per contact is 9$ which make a profit of $2 instead of $3 which you used throughout the video,please reconsider it

John Moffat says

No, you are wrong – you have completely misread the question.

The cost is $6. The contract is to a customer who will pay us $9. Therefore if we sell on contract the profit is $3.

usama44 says

thank you for clarifying my mistake I got it

John Moffat says

You are welcome 🙂

abiaccastudent says

hello sir, what is the concept behind placing the circumstance on yaxis and decision options on xaxis i m confused in constructing a payoff table only

John Moffat says

There is no x and y axis – we are not drawing a graph 🙂

You can set up the table any way you want – there is no concept involved in setting up the table.

The concept you are being tested on his how we make the decision – not how the table is set up.

iyamu says

This is the worst time i have ever have to replay this particular page just to understand the rules.

The normal customers , what rules or basis are you selecting the normal customers.

Choice Demands are 400 500 700 900

300

500

700 or

800

Now the first choice 300u was picked up at a profit of $3 = 1500

Normal demand was 400u @ $5. = 2000

Total $2900

The second choice was 500u @ profit of $3. = 1500

Now is my biggest problem is What is the normal demand to get our total units and profit

The third choice was 700u @ $3 = 2100

What is the next normal demand to give us the total profit and total units,

You choose 500 which was the second normal demand according to the questions …… please i need help as this is driving my head so crazy.

Thanks in advance .

John Moffat says

I am not quite sure what you are asking.

We need to calculate the profit from all 16 combinations of possible contract sizes and possible normal demands.

I shows the workings for 3 of them in full and then filled in the rest.

What may be causing your problem is that whatever happens we must make the contact units. Also, since the maximum we can make is 1,200 units, we can only sell a maximum of whatever is left after supplying the contract to the normal customers.

So, for example, if we sign a contract for 700 units, then the most we can supply to normal customers is 500 units (even if they actually demand 700 or 900 units).

leylayva says

Dear mr John,

Can you please explain why you used 400 units for normal demand ? I understand the choice for 300 units, but the normal demand part is still unclear for me. If I didn’t know the answer I would probably multiply the normal demand level to the probability, because there is no 100% guarantee that 400 units will be sold. Thank you in advance 🙂

John Moffat says

I assume that you have downloaded the free lecture notes that go with the lectures, in which case we know that the normal demand will be either 400, 500, 700 and 900.

You are quite right in saying that there is no guarantee that 400 will be sold – again, it will be either 400, 500, 700 or 900 that will be sold, and we therefore calculate what the profit will be for each of those 4 possible outcomes.

Then we apply the relevant rule (depending on whether we are using maximin, maximax, expected values, or minimax regret).

shyamkumar says

Hello Sir,

Question (a).. calculating all possible profits?

What is the reason for adding the 2 profits from Contract size and uncertain demand?

As the per contract,if there is guaranteed sales, there shd be no uncertain demand arising… please correct me if Im wrong?

shyamkumar says

Sir,

Please ignore my ques.. I think I got it?

Thanks…

John Moffat says

No problem 🙂

iyamu says

Have you pass f5 now@ all possible profits did you understand those figure apart from the 300 units and the uncertain demand?

shab34 says

Hi I need help on how to calculate ev please for chapter 10

John Moffat says

I don’t know what help you need!

Have you watched the lecture?

FARIHA says

Hello

Can you please guide me where can I find explanation of chapter 10 example 1 question a?

Thanks

John Moffat says

In the third lecture on Chapter 10 (there are 5 lectures in total).

If you listen carefully to what I say in the lecture on this page, I say that I will do expected values last (and you will find the reason when you come to the lecture later on perfect knowledge).

FARIHA says

thank you so much

John Moffat says

You are welcome 🙂