For Exercise 19.4, which decision alternative will be selected if the consultant uses the maximin criterion? The maximax criterion? The minimax regret criterion?
In exercise
A management consultant, unable to locate receipts or records for several business trips during the past year, makes some rough estimates of these expenditures and considers claiming them as business expenses on his income tax form. If he makes the claims and is not audited, he will owe $12,000 in taxes. If he makes the claims and the IRS audits his return, he will have to pay an extra $8,000 in taxes and penalties. If he ignores the trips, he will owe $14,000 in taxes. Construct a payoff table and a decision tree diagram for this decision situation.

  • CreatedSeptember 08, 2015
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