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16 May 2008

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Airway (a Midwestem department store chain) and Corvett (an Eastem department

store chain) are determining whether to expand their geographical bases. The only viable manner by which expansion might be carried out is for a chain to open stores in the other' s area. If neither chain expands, then Airway's profit will be $3 million and Corvett's will be $2 million. If Airway expands and Corvett does not, then Airway's profits will be $5 million, and Corvett will lose $2 million. If Airway does not expand and Corvett does, Airway willlose $1 million, and Corvett will eam $4 million. Finally, if both chains expand, Airway will eam $1 million and Corvett will eam $500000 in profits. Determine the equilibrium points, if any, for this game. 2. (Hornework # 4) Oilco has oil fields in San Diego and Los Angeles. The San Diego field can produce 500000 barrels per day, and the LA. field can produce 400000 barrels per day. Oil is sent from the fields to a refinery, in either Dallas or Houston (assume each refinery has unlimited capacity). To refine 100000 barrels costs $700 at Dallas and $900 at Houston. Refined oil is shipped to customers in Chicago and New York. Chicago customers require 400000 barrels per day, an? N.Y. customers require 300000 barrels per day. The costs of shipring 100000 barrels of oil (refined or unrefined) between cities are shown in the Table below. a. FormuIate an MCNFP that can be used to determine how to minimize the total cost of meeting all demands. (Draw a network and write down the LP) b. If each refinery had a capacity of 500000 barrels per day, how would the part (a)

answer be modifted? L.A. San Diego Dallas Dallas 300 420 Houston 110 100 N.Y. Chicago

Houston

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16 May 2008

232 / Section 2 1. Two competing firms mu st Simultan usiy determine how much of a prodilci to produce. The total profit earned by the tw firms is always $1000. Iffirm l's prodilction level is lawand firm 2's is alsa law, then i rm 1 earns a profit of $500; if firm l's level is lawand firm 2's is high, then firm l's prO 1t is $400. If firm l's prodilction level is high and so is firm 2' s, then firm l' s profit is $ 00; but if firin l' s level is high while firin 2' s level is low, then firin I's profit is oniy: 300. find the valne and optimal strategies for this game. 2. (Homework # 4) Fordco produces ca S in Detroit and Dallas. The Detroit planI can produce as manyas 6500 cars, and the D Has planI can produce as manyas 6000 cars.

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Prodilcing acar costs $2000 in Detroit a d $1800 in Dallas. Cars must be shipped to
three cities. City 1 mu st receive 5000 cars, city 2 must receive 4000 cars, and city 3 must receive 3000 cars. The cost of shipping acar from each planI each city is given in the Table below. At most, 2200 cars may te sent from a given planI to a given city. FormuIate an MCNFP that can be used t1 minimize the cost of meeting demand. Draw the network and write down the LP. From Detroit Dallas

~1 800 500

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