Asked by Tatiana Jones on Jun 03, 2024
Verified
Fashion Buyers II
A buyer for a department store must decide on which designs the stores will carry before he knows what the demand will be in the coming season.Choosing a poorly demanded design means lots of unsold merchandise and losses that are $200,000 on average.Passing on a highly demanded design means lots of unsold merchandise and missing out on profits that are $300,000 on average.So long as he is more than 40% confident that the design will be successful,carrying the design will minimize expected decision error costs.Why might he opt to carry designs only if he is more than,say,50% confident of success?
Expected Decision Error Costs
The anticipated costs associated with making incorrect decisions, often used in risk assessment and decision-making processes.
Unsold Merchandise
Items that have not been sold during a specific period, often leading to overstock and potential losses for businesses.
- Gain insight into navigating decision-making under uncertainty and the methods for balancing potential risks with potential rewards.
Verified Answer
JP
Jorgie PolyzosJun 05, 2024
Final Answer :
The buyer is rewarded for making good decisions and has bonuses withheld when he makes bad decisions.Every time the store has to dispose of unsold merchandise,it is apparent that he made a bad decision.However,there may be instances where his supervisor is unaware that the buyer passed on what would have been a profitable design.These bad decisions go unnoticed.He will opt to avoid the errors that are noticeable even if it means committing more errors that go undetected.
Learning Objectives
- Gain insight into navigating decision-making under uncertainty and the methods for balancing potential risks with potential rewards.
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