300D Problerm A car dealer is offering three two-year leasing options. PlanFixed
ID: 3354218 • Letter: 3
Question
300D Problerm A car dealer is offering three two-year leasing options. PlanFixed Monthly PaymentAdditional cost per mile e Pobaones, whicn atelative would you choose? $200 $300 $0.095 per mile S0.061 for the first 6000, miles; $0.050 thereafter $0.000 for the first 6000 miles; $0.14 per $170 mile thereafter Assume that a customer expects to drive between 15,000 and 35,000 miles during the next two years according to the following probability distribution: P(driving 15,000 miles) 0.1 driving 20,000 miles) = 0.2 P(driving 25,000 miles) 0.2 P(driving 30,000 miles) = 0.3 Edriving 35,000 miles) = 0.2 a nstruct a payoff matrix for this problem. (keep in mind that the "payoffs" here are costs, where less is better. So construct your payoff matrix in terms of negative rewards and use the rules normally) b. Determine what decision the customer should make according to the Maximax c. d. e. decision rule. What decision should be made according to the Maximin decision rule? What decision should be made according to the expected value decision rule? What decision should be made according to the Minimax regret decision rule? Page 2 of 3Explanation / Answer
Maximax Criterion : Payoff Matrix
Plan
Distance
I
II
III
Maximum
Probability
15000
-162.5
-111.6
-143
-111.6
0.1
20000
-420
-273.2
-426
-273.2
0.2
25000
-515
-323.2
-566
-323.2
0.2
30000
-915
-559.8
-1059
-559.8
0.3
35000
-705
-423.2
-846
-423.2
0.2
Maximum
-162.5
-111.6
-143
Decision according to Maximax decision rule is customer should select plan II and travel 15000 km
Maximin Criterion : Payoff Matrix
Plan
Distance
I
II
III
Maximum
Probability
15000
-162.5
-111.6
-143
-111.6
0.1
20000
-420
-273.2
-426
-273.2
0.2
25000
-515
-323.2
-566
-323.2
0.2
30000
-915
-559.8
-1059
-559.8
0.3
35000
-705
-423.2
-846
-423.2
0.2
Minmum
-915
-559.8
-1059
Decision according to Maximin decision rule is customer should select plan II and travel 30000 km
Expected Value Criterion : Payoff Matrix
Plan
Distance
I
II
III
Mean
Probability
15000
-162.5
-111.6
-143
-139.03
0.1
20000
-420
-273.2
-426
-373.07
0.2
25000
-515
-323.2
-566
-468.07
0.2
30000
-915
-559.8
-1059
-844.60
0.3
35000
-705
-423.2
-846
-658.07
0.2
Mean
-543.5
-338.2
-608
-496.57
Decision according to Expected Value decision rule is customer should select plan I and travel 25000 km
Maximax Criterion : Payoff Matrix
Plan
Distance
I
II
III
Maximum
Probability
15000
-162.5
-111.6
-143
-111.6
0.1
20000
-420
-273.2
-426
-273.2
0.2
25000
-515
-323.2
-566
-323.2
0.2
30000
-915
-559.8
-1059
-559.8
0.3
35000
-705
-423.2
-846
-423.2
0.2
Maximum
-162.5
-111.6
-143
Decision according to Maximax decision rule is customer should select plan II and travel 15000 km
Maximin Criterion : Payoff Matrix
Plan
Distance
I
II
III
Maximum
Probability
15000
-162.5
-111.6
-143
-111.6
0.1
20000
-420
-273.2
-426
-273.2
0.2
25000
-515
-323.2
-566
-323.2
0.2
30000
-915
-559.8
-1059
-559.8
0.3
35000
-705
-423.2
-846
-423.2
0.2
Minmum
-915
-559.8
-1059
Decision according to Maximin decision rule is customer should select plan II and travel 30000 km
Expected Value Criterion : Payoff Matrix
Plan
Distance
I
II
III
Mean
Probability
15000
-162.5
-111.6
-143
-139.03
0.1
20000
-420
-273.2
-426
-373.07
0.2
25000
-515
-323.2
-566
-468.07
0.2
30000
-915
-559.8
-1059
-844.60
0.3
35000
-705
-423.2
-846
-658.07
0.2
Mean
-543.5
-338.2
-608
-496.57
Decision according to Expected Value decision rule is customer should select plan I and travel 25000 km
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.