An Introduction to Management Science 13th Edition by David Anderson,Dennis Sweeney ,Thomas Williams ,Jeffrey Camm, Kipp Martin

Exercise 6

For the Pittsburgh Development Corporation problem in Section 13.3, the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. In Section 13.4 we conducted a sensitivity analysis for the payoffs associated with this decision alternative. We found that the large complex remained optimal as long as the payoff for the strong demand was greater than or equal to $17.5 million and as long as the payoff for the weak demand was greater than or equal to -$19 million.
a. Consider the medium complex decision. How much could the payoff under strong demand increase and still keep decision alternative d 3 , the optimal solution?
b. Consider the small complex decision. How much could the payoff under strong demand increase and still keep decision alternative d 3 , the optimal solution?