Given is a decision payoff table Alternatives Low Small Faclity 35 Medium Facili
ID: 325139 • Letter: G
Question
Given is a decision payoff table Alternatives Low Small Faclity 35 Medium Facility 22 Large Facility-7 Future Demand Moderate 28 36 27 High 29 26 35 facility a) The best decision under uncertainty using MAXIMAX is to select b) The best decision under uncertainty using MAXIMIN is to select c) The best decision under uncertainty using LAPLACE/EQUALITY LIKELY is to select facility facility d) If the probabilities for Future Demand when it is Low 0.35, Moderate -0.30, and High -0.35, the expected monetary value (EMV) for the large facility e) If the probabilities for Future Demand when it is Low - 0.35, Moderate -0.30, and High -0.35, the best decision under risk is to select facility.Explanation / Answer
a. using MAXIMAX, first the highest payoff in the table is selected.
This is 36. Medium Facility (Moderate demand)
b. Using MAXIMIN , the minimum pay off is maximised
Minimum if we select small facility, moderate 28
Minimum if we select medium facility, low 22
Minimum if we select large facility, low -7
Among these, the highest is small facility
c.We assign 33% probability to each criterion
Total pay off for small facility = (35*0.33) + (28*0.33) + (29*0.33) = 30.36
Total pay off for medium facility = (22*0.33) + (36*0.33) + (26*0.33) = 27.72
Total pay off for large facility = (-7*0.33) + (27*0.33) + (35*0.33) = 18.15
Highest is selected -> Small facility
d. Total pay off for small facility = (35*0.35) + (28*0.3) + (29*0.35) = 30.8
Total pay off for medium facility = (22*0.35) + (36*0.3) + (26*0.35) = 27.6
Total pay off for large facility = (-7*0.35) + (27*0.3) + (35*0.35) = 17.9
Highest is selected -> Small facility
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