Model

Giant Motor Company

Plant characteristics
Capacity (in millions)
Fixed cost (in $billions)

Lyra
1
2

Libra
0.8
2

Hydra
0.9
2.6

New Lyra
1.6
3.4

New Libra
1.8
3.7

Profit margin (in $1000s) per car (large negative numbers mean the plant can't make that car)
Lyra
Libra
Hydra
New Lyra New Libra
Lyra
2
-100
-100
2.5
2.3
Libra
-100
3
-100
3
3.5
Hydra
-100
-100
5
-100
4.8
Demand (in millions)
Lyra
Libra
Hydra

1.4
1.1
0.8

Demand diversion matrix (from along side, to along top)

Lyra
Libra
Hydra
Lyra
NA
0.3
0.05
Libra
0
NA
0.1
Hydra
0
0
NA

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Model

Assumptions:
Assumptions:
1. The
The Lyra
Lyra and/or
and/or Libra
Libra plants
plants can
can be
be retooled.
retooled.
1.
2.
The
Hydra
plant
must
stay
open
and
cannot be
be retooled.
retooled.
2. The Hydra plant must stay open and cannot
3.
There
is
no
incentive
to
produce
more
than
demand.
3. There is no incentive to produce more than demand.

ke that car)

Page 2

Model

ed.
ed.
not
be retooled.
retooled.
not be
n
demand.
n demand.

Page 3