Abstract
Palak Sheth is the proprietor of Vastrapur Widgets Limited (VWL), which manufactures widgets for machines that produce engineering goods. Sheth is facing a dilemma regarding an export order for 1,000 units. The dilemma is whether VWL should use the existing raw material or discard it and use new raw material, which comes with an additional INR 4,000. If the company uses the existing raw material, it can face certain economic consequences related to the number of failures in the produced batch. The number of failures in a batch is divided into three possibilities: 0%, 10% and 30% defects, with respective probabilities of 0.75, 0.15 and 0.10. There is also a via-media option, in which VWL can do a sampling and figure out the nature of the raw material to better understand uncertainty.
Additional Information
| Product Type | Case |
|---|---|
| Reference No. | O&DS0005EX |
| Title | Vastrapur Widgets Limited: Exercise Note |
| Pages | 3 |
| Published on | Apr 22, 2024 |
| Year of Event | 2024 |
| Authors | Ravichandran, N.; Patel, Nikunjkumar; |
| Area | Operations & Decision Sciences (O&DS) |
| Discipline | Quantitative Methods |
| Sector | Manufacturing |
| Learning Objective | After reading and discussing the exercise, students should be able to • address a real-life situation in the context of uncertainty • revise their understanding of the basic formulation of the decision problem using a payoff table, regret table, etc. • use the Bayesian theorem to revise prior probability • identify the optimal sample size in a given context using expected net gain in sampling. |
| Keywords | Decision under uncertainty; Expected gain of sampling; Posterior Probabilities; Expected value of perfect information; Expected Monetary Value; Expected net gain in sampling |
| Country | India |
| State | Gujarat |
| City | Ahmedabad |
| Organization | Vastrapur Widgets Limited |
| Access | For All |
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