Question

3. A friend of yours is in the market for a new computer. Four different machines are under consideration. The four computers are essentially the same, but they vary in price and reliability. The computers are described as follows: A Price: $998.95 Expected number of days in the shop per year: 4 B Price: $1300.00 Expected number of days in the shop per year: 2 C Price: $1350.00 Expected number of days in the shop per year: 2.5 D Price: $1750.00 Expected number of days in the shop per year: 0.5 The computer will be an important part of your friend's livelihood for the next two years. After two years, the computer will have a negligible salvage value. In fact, your friend can foresee that there will be specific losses if the computer is in the shop for repairs. The magnitude of the losses are uncertain but are estimated to be approximately $180 per day that the computer is down. a) Can you give your friend any advice without doing any calculations? b) Determine individual linear value functions for price and reliability. c) The additive value function method of amalgamation is assumed. Use the information given to determine weights $w_p$ and $w_r$, where $p$ and $r$ stand for price and reliability, respectively. Keep in mind that $w_p + w_r = 1$. d) Calculate overall values for the computers. What do you conclude?

          3.
A friend of yours is in the market for a new computer. Four different machines are under
consideration. The four computers are essentially the same, but they vary in price and
reliability. The computers are described as follows:
A Price: $998.95 Expected number of days in the shop per year: 4
B Price: $1300.00 Expected number of days in the shop per year: 2
C Price: $1350.00 Expected number of days in the shop per year: 2.5
D Price: $1750.00 Expected number of days in the shop per year: 0.5
The computer will be an important part of your friend's livelihood for the next two years.
After two years, the computer will have a negligible salvage value. In fact, your friend
can foresee that there will be specific losses if the computer is in the shop for repairs. The
magnitude of the losses are uncertain but are estimated to be approximately $180 per day
that the computer is down.
a) Can you give your friend any advice without doing any calculations?
b) Determine individual linear value functions for price and reliability.
c) The additive value function method of amalgamation is assumed. Use the information
given to determine weights $w_p$ and $w_r$, where $p$ and $r$ stand for price and reliability,
respectively. Keep in mind that $w_p + w_r = 1$.
d) Calculate overall values for the computers. What do you conclude?

3.
A friend of yours is in the market for a new computer. Four different machines are under
consideration. The four computers are essentially the same, but they vary in price and
reliability. The computers are described as follows:
A Price: 998.95 Expected number of days in the shop per year: 4
B Price:1300.00 Expected number of days in the shop per year: 2
C Price: 1350.00 Expected number of days in the shop per year: 2.5
D Price:1750.00 Expected number of days in the shop per year: 0.5
The computer will be an important part of your friend's livelihood for the next two years.
After two years, the computer will have a negligible salvage value. In fact, your friend
can foresee that there will be specific losses if the computer is in the shop for repairs. The
magnitude of the losses are uncertain but are estimated to be approximately 180 per day
that the computer is down.
a) Can you give your friend any advice without doing any calculations?
b) Determine individual linear value functions for price and reliability.
c) The additive value function method of amalgamation is assumed. Use the information
given to determine weightswpandwr, wherepandrstand for price and reliability,
respectively. Keep in mind thatwp + wr = 1.
d) Calculate overall values for the computers. What do you conclude?

Added by Martin T.

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