Question

Case 1 Quantitative Analysis

Ashley Miller has three major routes to commute to work: take RiverView Street the entire way, take several back streets, or use the expressway. The traffic patterns are pretty complex. Under good conditions, RiverView Street is the fastest route; however, when it is congested, one of the other routes is usually preferable. Over the past two months, Ashley has tried each route several times under different traffic conditions. Her travel time to work (in minutes) is summarized in the following table.

STATES OF NATURE

DECISION ALTERNATIVES	NO TRAFFIC CONGESTION (minutes)	MILD TRAFFIC CONGESTION (minutes)	SEVERE TRAFFIC CONGESTION (minutes)
RiverView Street	15	30	45
Back roads	20	25	35
Expressway	30	30	30

1. If nothing is known about the demand probabilities,

a. Based on Conservative Approach, which route should Ashley choose to commute to work?

b. Using the Minimax Regret Approach, create the Opportunity Loss/Regret Table. What route should Ashley take if she wants to minimize average drive time?

2. Suppose the probabilities for No Traffic Congestion, Mild Traffic Congestion, and Severe Traffic Congestion are 50%, 33%, and 17% respectively,

c. Construct a Decision Tree (draw it neatly by using MS Word/MS Excel Drawing Tool OR if you are drawing it by hand, please a ruler) and solve it using Expected Value Approach. What is the recommended decision alternative?

d. Calculate the Expected Value of the Perfect Information (EVPI)?

Answer 1