A manager needs to hire short-term employees to meet production demands. The man

Question

A manager needs to hire short-term employees to meet production demands. The manager would like to hire one of three possible short-term workers.

(a) Which alternative is most optimistic?
(b) Which alternative is most pessimistic?
(c) Using the Hurwicz criterion with a coefficient of realism, = 0.70, what is the best alternative?

STATES OF NATURE (WORKER HOURS DEMANDED ALTERNATIVES 10 hr total pay 20 hr total pay 30 hr total pay worker 1 1000 1800 2400 worker 2 900 1800 2500 worker 3 950 1750 2550

Explanation / Answer

a) A very optimistic decision criterion – Decision maker assumes that the most favorable state of nature for each action will occur. Select the decision that results in the maximum of the maximum rewards

Miximax = 2550 Decistion Worker 3

b)

Select the decision that results in the maximum of the minimum rewards
A very pessimistic decision criterion – Decision maker assumes that the minimum reward occurs for each decision alternative – Select the maximum of these minimum rewards

Maximini = 100 Decistion Worker 1

c)

Criterion of realism = alpha(row maximum) + (1-alpha)(row minimum)

Maximum = 2070, Decision = Worker 3

Maximax Criteria Scenario 1 Scenario 2 Scenario 3 Maximum Worker 1 1000 1800 2400 2400 Worker 2 900 1800 2500 2500 Worker 3 950 1750 2550 2550

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