Maria Sanchez owns a health and fitness center called Bulk-Up in Harrisburg. She is considering adding more floor space to meet increasing demand. She will add either 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 are the changes in Bulk-Up’s annual profits under each combination of expansion level and demand change level:

Maria is risk averse and wishes to use the maximin criterion.a) What are her decision alternatives and what are the states of nature?b) What should she do?

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DEMAND CHANGE Fixed Slight increase Major increase N $0 $2,000 $3,000 EXPANSION LEVEL L D $10,000 - $50,000 $ 6,000 $ 4,000 $20,000 $40,000 M -$4,000 $8,000 $9,000