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Decision Making Answers

The document outlines decision-making strategies using Maximax, Maximin, and Minimax Regret for various investment options, products, strategies, and cars. For each scenario, the optimal choices based on maximum payoffs, minimum payoffs, and lowest regrets are identified. The final selections include Option A, Product D, Strategy D, Car D, and Project D.

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Raiyan Bin Mushtaque
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10 views

Decision Making Answers

The document outlines decision-making strategies using Maximax, Maximin, and Minimax Regret for various investment options, products, strategies, and cars. For each scenario, the optimal choices based on maximum payoffs, minimum payoffs, and lowest regrets are identified. The final selections include Option A, Product D, Strategy D, Car D, and Project D.

Uploaded by

Raiyan Bin Mushtaque
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Maximax (Optimistic Decision): Find the maximum payoff for each market situation:
Booming Market: $500,000
Stable Market: $150,000
Recession: $20,000

Choose the option with the highest maximum payoff: Option A.

Maximin (Pessimistic Decision): Find the minimum payoff for each market situation:
Option A: $300,000
Option B: $100,000
Option C: -$50,000

Choose the option with the highest minimum payoff: Option B.

Minimax Regret (Regret Minimization): Construct a regret table:

Regret = Maximum value in a column - Current value.

Investment Option Booming Market Stable Market Recession Maximum Regret


Option A $0 $0 $70,000 $70,000
Option B $200,000 $50,000 $0 $200,000
Option C $100,000 $30,000 $30,000 $100,000

Choose the option with the lowest maximum regret: Option A.

2. Maximax (Optimistic Decision): Choose the option with the highest maximum payoff:
Product D.

Maximin (Pessimistic Decision): Choose the option with the highest minimum payoff:
Product B.

Minimax Regret:

Highly Highly Maximum


Product Favorable Neutral Unfavorable
Favorable Unfavorable Regret
Product A $500,000 $100,000 $50,000 $60,000 $150,000 $500,000
Product B $700,000 $300,000 $100,000 $40,000 $50,000 $700,000
Product C $300,000 $200,000 $70,000 $40,000 $100,000 $300,000
Product D $0 $0 $0 $0 $0 $0

Choose the option with the lowest maximum regret: Product D.


3. Maximax (Optimistic Decision): Choose the option with the highest maximum payoff:
Strategy D.

Maximin (Pessimistic Decision): Choose the option with the highest minimum payoff:
Strategy B.

Minimax Regret:

Strategy High Demand Moderate Demand Low Demand Market Saturation Maximum Regret
Strategy A $200,000 $100,000 $80,000 $100,000 $200,000
Strategy B $300,000 $130,000 $60,000 $40,000 $300,000
Strategy C $100,000 $70,000 $40,000 $60,000 $100,000
Strategy D $0 $0 $0 $0 $0

Choose the option with the lowest maximum regret: Strategy D.

4. Maximax (Optimistic Decision): Choose the option with the highest maximum payoff: Car
D.

Maximin (Pessimistic Decision): Choose the option with the highest minimum payoff: Car A
and Car B.

Calculate Regret Table:

Car Model Fuel Efficiency Comfort Safety Maximum Regret


Car A $10,000 $2,000 $6,000 $10,000
Car B $5,000 $7,000 $8,000 $8,000
Car C $7,000 $0 $4,000 $7,000
Car D $0 $4,000 $0 $4,000

Choose the option with the lowest maximum regret: Car D ($4,000).

5. Maximax (Optimistic Decision): Choose the option with the highest maximum payoff:
Project D.

Maximin (Pessimistic Decision): Choose the option with the highest minimum payoff: Car A
and Project B.

Calculate Regret Table:


Moderate Over-saturated
Project High Demand Low Demand Maximum Regret
Demand Market
Project A $500,000 $150,000 $100,000 $100,000 $500,000
Project B $700,000 $250,000 $200,000 $150,000 $700,000
Project C $300,000 $50,000 $50,000 $50,000 $300,000
Project D $0 $0 $0 $0 $0

Choose the option with the lowest maximum regret: Project D ($0).

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