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October 16, 2022 at 10:31 am
Dear Sir, Just want to double check, when we calculate the expected value, do we need to multifiy the revenue from agreed contract by the probability. I think it is a known income and certain.
John Moffat says
October 16, 2022 at 4:09 pm
You can either multiply the total revenue by the probabilities, or alternatively you can calculate the ‘normal’ revenue by the probabilities and then add the income from the contract. The end result is the same.
October 19, 2022 at 2:17 am
Many thanks for the clarification Sir!
October 19, 2022 at 9:36 am
You are welcome 🙂
July 13, 2020 at 3:51 am
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July 13, 2020 at 9:48 am
Thank you for your comment 🙂
May 13, 2020 at 10:06 am
Thank you very for the lecture. I think I have an understanding of the minimax regret now. i have been struggling with it for the most part of my exam preparation. So the main point to keep in mind is that we want to minimize our maximum regret. And we do that by calculating regrets at each possible decision we make. So what we basically saying is that if we make our best choice we have no regret, but any other choice then that, then there will be an opportunity to maximise our returns forgone and hence the regret. I am just trying to check if I grasp the concept.
February 18, 2020 at 10:54 pm
Does the expected value look at the probability of our uncertain demand in relation to different contract amounts? Also why do we multiply the sum of the contract value and uncertainty by the probability when the contract would mean 100% demand of the set contract units. Does the probabilities not only affect the uncertain demand profits?
February 19, 2020 at 8:51 am
The probabilities only relate to the uncertain demand (in this question the normal demand). The contracted amount is our choice and is not uncertain, but whatever amount we decide to sign the contract for the eventual outcome will depend on the level of normal demand that occurs.
February 19, 2020 at 6:37 pm
Okay that makes sense. Thanks!
January 13, 2020 at 9:00 pm
Hi sir John, why are we using normal demand in calculating the regret rule but used contract sizes for maximax and maximin. if we used the contract sizes then the regret value for contract size 800 should have been zero all through. Please explain
January 14, 2020 at 5:14 am
We are not using normal demand to make the decision. It is when creating the regret table in the first place that we look at how much is lost in each case had we made the ‘wrong’ decision.
November 22, 2019 at 11:54 am
Sir! Regarding your lecture in solving for the minimax in Demand of 900 in our regret table, the difference of 5000 and 4600 is 400. Did I miss a point of how it got an 800 difference?
November 30, 2019 at 1:51 pm
Hi ellesouth16, in the case of the demand of 900 units, instead of deducting 4,600 from 5,000, we should use 5,600 instead. And that is how we got the difference of 800.
November 19, 2019 at 2:16 am
Hi John, On Expected values with probabilities (referring to the example question in your lecture video), shouldn’t we be applying the probability to the normal demand customers alone, instead of total demand? Thank You.
November 19, 2019 at 9:56 am
No. We apply the probabilities to the final outcomes in $’s (not to the demand) and the final outcomes depend on both the normal demand and the contract agreed.
October 24, 2019 at 5:48 pm
Respected sir, There’s a lot question of expected values in BPP. A manager has to choose between exclusive option c and d But the way they answered Is not shown in the book except the final answer which is option c m, But I really don’t know how they have calculated it kindly help me regarding this question
October 25, 2019 at 9:03 am
How can I help you if I don’t know which question you are referring to? Please ask in the Ask the Tutor Forum (not here) but tell me which question.
August 19, 2019 at 1:50 pm
I am confused. Which one we should focus? choices or the uncertainty?
August 19, 2019 at 3:14 pm
I assume you are referring to the preparation of the regret table. If so, then for each uncertain item (the level of normal demand) we calculate the regret for each of the possible choices.
I do suggest you watch the lecture again because I do spend time explaining.
December 16, 2018 at 1:18 am
Hi dear john I watched your lecture and that was really helpful for me except the last point you coverd was about expected value I couldnt get what is the correct definition of probability at first My thought was about it is a rate that shows there is a risk that our normal demand might be 0.X possible of the total And so we should just multiply it by our normal expected profit and Because the contract is not probable and it is guaranteed, its profit should be fixed and unchanged But here as a consequence you considered the probability rate is multiplied by both normal and contracted demand. I think i got somethinge wrongly So would you please show me the right logic
Thanks for your lectures…
November 26, 2018 at 10:39 am
Question 9 in the BPP question and practice kit has it with negative numbers. It was profit margin as the exam, so had to add it. For example, option 2 was -8 and best for that demand was 4. Therefore, answer was -12. In order to get the best it was out by -12.
I hope I am making sense, sorry.
November 26, 2018 at 10:56 am
Question 9 in the current edition of the BPP Kit is nothing to do with uncertainty – tell me the name of the question and I will see if it is the current edition.
However, the regret table – by definition – is showing ‘losses’, so we never show them as negatives (you cannot have negative regret 🙂 )
November 26, 2018 at 2:23 pm
It’s called Sweet Cicely Sept/Dec 2017 past paper question
November 27, 2018 at 7:48 am
There is no question in the current edition of the BPP Revision Kit called Sweet Cicely, and there is no published question from the actual Sep/Dec 2017 exam on risk and uncertainty.
November 23, 2018 at 2:15 pm
Hi John, thank you for this lecture/ for minimax regret,how do we work it out if we have negative values please? instead of subtracting the max regret, do we add?
November 23, 2018 at 2:34 pm
But you won’t ever have negative values in the table (the regret is the difference between the best result and the actual result).
November 26, 2018 at 3:43 am
Thank you very much sir.
November 26, 2018 at 10:52 am
November 1, 2018 at 10:30 am
Thanks John. Well understood. The minimax regret approach looks at the minimum of the maximum regret and is used by someone who is a risk avoider.
Expected value looks at the average return of the outcomes (contract is sign for the outcome with the highest return) and is an approach used by someone who is risk neutral. Such an individual make decision based on the most likely or average outcome that may occur.
November 1, 2018 at 2:58 pm
September 26, 2018 at 9:36 am
hi sir, for minimax regret do we ignore the contract sizes here? and only focus on the uncertain demand?
September 27, 2018 at 8:44 am
It is the contract size that we are choosing.
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