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February 6, 2020 at 4:45 am
I have a doubt about expected values. The customer contract is a fixed quantity so there no required to use the probability. So, isn’t it correct that we use the full contract value plus the probability of the expected market demand?
for eg: At contract 300 and demand 400, contract profit is 300×3, and demand profit is 400×0.2×5, so the expected value will be 1300?
John Moffat says
February 6, 2020 at 7:56 am
The problem is that they will. not always be able to supply the expected normal demand. For example, if they have signed the contract to supply 500 units, then the most they can sell to the normal demand is 700 units (because the capacity is limited to 1,200 units) regardless of the size of the normal demand.
January 8, 2020 at 9:12 pm
Hi John, im abit unsure on how we get to putting 400,500,700,900 at the top and 300,500,700,800 on side, is there a particular ruling which needs to be followed when labelling each side and then making the calculations, such as when we do maximin and minimax we go sideways but when looking at minimax regret we go downwards? im just confused as I always label the sides wrong and because of that all my workings are wrong,
July 16, 2020 at 12:43 pm
I have the same question.
July 16, 2020 at 5:01 pm
It does not matter which way round you draw the table. What matters is that you identify what it is that is uncertain and what it is that we have to make a decision on. Don’t learn it just as rules – make sure you really understand the basis on which we are making the decision under each of the methods.
September 30, 2019 at 9:49 pm
Thanks a lot John. Very clear again. Does the syllabus include sensitivity analysis and simulation?
February 10, 2020 at 7:44 pm
Isn’t that part of the FM syllabus? (Where simulation isn’t something we’re required to actually carry out in exam)
August 22, 2019 at 8:47 am
Oh dear… You speak so fast, I didn’t understand anything. It looks like you teach for students from english speaking countries only…
August 22, 2019 at 5:03 pm
Well you are completely wrong – I do all of my teaching in non-English speaking countries in Eastern Europe 🙂
I am puzzled that you only say this for this lecture. Have you not watched all of the previous lectures – if you have then you have presumably got used to my speaking? There is no point in watching a lecture out of order – the lectures are a complete free course and cover everything needed to be able to pass the exam well (and, of course, this lecture makes no sense on its own because it follows on from the earlier chapters).
April 17, 2019 at 5:00 pm
Hi John, I didn’t understand how you came up with expected value of 4500, if we signed the contract of 700, as I figured, profit is calculated like: 700*3+(1200-700)*5 = 4600, did I miss the point?
April 17, 2019 at 5:03 pm
Sorry John, Just figured I missed one lecture.
November 16, 2018 at 6:17 pm
Hi John, I don’t understand why do we must use this way to calculate the EV if we using market research? How do we know to if this is the way to calculate the EV if we using market research to obtain perfect information?
November 1, 2018 at 2:03 pm
Thank you John.
November 1, 2018 at 2:59 pm
You are welcome 🙂
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