Jim Has Been Employed at Gold Key Realty at a Salary

Essay

Jim has been employed at Gold Key Realty at a salary of $2,000 per month during the past year.Because Jim is considered to be a top salesman,the manager of Gold Key is offering him one of three salary plans for the next year: (1)a 25% raise to $2,500 per month; (2)a base salary of $1,000 plus $600 per house sold;or, (3)a straight commission of $1,000 per house sold.Over the past year,Jim has sold up to 6 homes in a month.
a.Compute the monthly salary payoff table for Jim.
b.For this payoff table find Jim's optimal decision using: (1)the conservative approach, (2)minimax regret approach.
c.Suppose that during the past year the following is Jim's distribution of home sales.If one assumes that this a typical distribution for Jim's monthly sales,which salary plan should Jim select?
Home Sales Number of Months
0 1
1 2
2 1
3 2
4 1
5 3
6 2