Milford Trucking Company of Chicago has requests to haul two shipments, one to S
ID: 365874 • Letter: M
Question
Milford Trucking Company of Chicago has requests to haul two shipments, one to St. Louis and one to Detroit. Because of schoduling problem, Milford will be able to aocept only of these assignments. The St. Louis customer has guaranteed a retum shipment, but the Dctroit customer has not This if Milford accepts the Detroit shipment and cannot find a Detroit-Chicago retum shipment, the truck wll retum to Chicago empty. The Payoff table showing profit is as follows. has the following payoff tahle Return Ship No Return Shipment from Detroit From Detroit St. Louis d Detroit d Probabilities 2000 2500 0.40 2000 1000 0.60 a. If the probability of a Detroit return shipment is 0.4, what should Milford do? b. What is the expected value of perfect information that would tell Milford Trucking whether Detroit has a retum shipment? c. Milford can phone a Detroit truck dispatch center and determine if the general Dctroit shipping activity is busy ( or slow (). If the the chances of obtaining a retum shi will incrcase. the following conditional probabilities are given: I s:) = 0.4 = 0.7 S)) 0.6 0.3 What should Milford do? d. If the Detroit report is busy (I), what is the probability that Milford will obtain a returm shipment if it makes the trip to Detroit? c. What is the efficiency of the phone information?Explanation / Answer
A.
So It should still go for Detroit.
If we consider only return :
Then St Louis should be opted.
B.
Hence EVPI = $900.
C.
Hence taking the information it matches the St Louis in case the information says busy, and in case it says Slow the EV is very less.and less than EVwoPI.
D.
P (S1) for P(I1) = 0.6/(0.6+0.3) =
E.
Correctness of info:
.
Shipment s1 s2 St Louis d1 2000 2000 Detroit d2 2500 1000 P 0.4 0.6 EV d1 4000 (To EV+ From EV) (1*2000+1*2000) d2 4100 (To EV+ From EV) (1*2500+0.4*2500+0.6*1000)