Evertogh independent gasoline stain have been having dfult time, lan Langela has

Question

Evertogh independent gasoline stain have been having dfult time, lan Langela has beetriingabout aing his own independent gascine station lane problem is to decide how large his station should be. The annual retums will depend on both the size of his station and a number of marketing factors related to the oll Industry and demand for gescline. A/or a carsful analysis, lan developed the following table States of Natue Sire of First Station Good MarketFair Market Poor Markat $40,000 $18,000 $90,000 $27000 $22,000 05000 27,5006.000 320,000 26,000 $180,000 This exeraise contains only parts b, c, and d b) Using the decision making under uncertainty with the criterion of Maximax The appropriate decision will be The value of the rotum under this decision c) Using the decision making under uncertainty with the criterion of Maximin The appropriate decision will be Enter your answer in each of the answer boxes flights? MacBook Air , 6 8

Explanation / Answer

b) Maximax = Determine the best possible payoff, and choose the alternative with that payoff.

Small = 40,000

Medium = 90,000

Large = 105,000

Very Large = 320,000

Ans = Very Large

c) Maximin = Determine the worst possible payoff for each alternative, and choose the
alternative that has the “best worst.”

Small = -8000

Medium = -22000

Large = -38000

Very Large = -180,000

Ans = Small

d) Equal likely = Determine the average payoff for each alternative, and choose the alternative
with the best averag

Ans = Very Large

Average Small 40000 18000 -8000 16667 Medium 90000 27000 -22000 31667 Large 105000 27500 -38000 31500 Very Large 320000 26000 -180000 55333

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