A hospital administrator in Portland is trying to determine whether to build a large wing onto the existing hospital, a small wing, or no wing at all. If the population of Portland continued to grow, a large wing could return $225,000 to the hospital each year.
If the small wing were built, it would return $90,000 to the hospital each year if the population continued to grow. If the population of Portland remained the same, the hospital would encounter a loss of $125,000 if the large wing were built. Furthermore, a loss of $65,000 would be realized if the small wing were constructed and the population remained the same. It is unknown whether Portland’s population will grow in the near future.
(a) Construct a decision table.
(b) Using the equally likely criterion, determine the best alternative.
(c) The chairman of the hospital’s board has advised using a coefficient of realism of 0.7 in determining the best alternative. What is the best decision according to this criterion?