Raymond Jacobs owns a health and fitness center the Muscle-Up, in Ashland. He is considering adding more floor space to meet increasing demand. He will either add no floor space (N), a moderate area of floor space (M), a large area of floor space (L), or an area of floor space that doubles the size of the facility (D). Demand will either stay fixed, increase slightly, or increase greatly. The following arc the changes in Muscle-Up’s, annual profits under each combination of expansion level and demand change level:

Raymond is risk averse and wishes to use the maximin criterion.
(a) What are his decision alternatives and what are the states of nature?
(b) What should hedo?

  • CreatedJuly 23, 2013
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