Even though independent gasoline stations have been having a difficult time, Sus

Question

Even though independent gasoline stations have been having a difficult time, Susan Solomon has been thinking about starting her own independent gas station. Susan’s problem is to decide how large her station should be. The annual returns will depend on both the size of the station and a number of marketing factors related to oil industry and demand for gasoline. After careful analysis, Susan developed the following table: Size of Gasoline Station Good Market ($) Fair Market ($) Poor Market ($) Small $5,000 $2500 -$1000 Medium $10,000 $7000 -$5,000 Large $25,000 $12,500 -$20,000 You may use Excel QM or QM for Windows: 1. What is the Maximax decision? Answer: Explanation (include software output or calculation): 2. What is the Maximin decision? Answer: Explanation (include software output or calculation): 3. What is the criterion of realism decision? Use = 0.25. Answer: Explanation (include software output or calculation): 4. Develop an Opportunity Loss Table. Table: 5. What is the Minimax Regret Decision? Answer: Explanation (include software output or calculation):

Explanation / Answer

Please find the solutions below

The maximax is 25000

Maximin is -1000.

3. Criterion of realism = Alpha (row max) + (1-alpha) row min

Select the highest value among all

Highest value among all - 500

4. Minimax regret decision

Minimax is 5000

Size of gasoline station Good fair Small Maximax maximin Small 5000 2500 -1000 5000 -1000 Medium 10000 7000 -5000 10000 -5000 Large 25000 12500 -20000 25000 -20000 25000 -1000

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