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Are the probablities being mentioned just for the normal customer or the total amount to be expected from both parties? I don’t understand why we calculate the expected values or the pay-off matrix by adding both the contracted customer quanities and amounts and add on the normal customer quanties and contribution. I was expecting to use the probablitiy of the normal customer and then add on to the fixed contracted price of the contract customer. Please advise.
They are for normal customers. The contracted amounts are constant at whatever the contracted amount is. Both types of customer need to be taken into account because the contracted amounts take precedence over normal customers which means that sales to normal customers often have to be less than demanded by normal customers.