Given the pay-off table below, determine the appropriate decision under uncertai
ID: 471802 • Letter: G
Question
Given the pay-off table below, determine the appropriate decision under uncertainty using:
Minimax Regret
States of Nature-Outcomes
Alternatives
Very Favorable
Average
Unfavorable
Build New Plant
$350,000
$240,000
-$300,000
Subcontract
$180,000
$90,000
-$20,000
Overtime
$110,000
$60,000
-$10,000
Do Nothing
$0
$0
$0
States of Nature-Outcomes
Alternatives
Very Favorable
Average
Unfavorable
Build New Plant
$350,000
$240,000
-$300,000
Subcontract
$180,000
$90,000
-$20,000
Overtime
$110,000
$60,000
-$10,000
Do Nothing
$0
$0
$0
Explanation / Answer
Solution :
Applying the minimax regret criteria the minimum regret value happens to be $ 170,000 and it is associated with the decision alternative subcontract . The table is shown below : -
Alternatives Very Favorable Average Unfavorable Build New Plant $0 $0 $290,000 Subcontract $170,000 $150,000 $10,000 Overtime $240,000 $180,000 $0 Do Nothing $350,000 $240,000 ($10,000)Related Questions
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