Sun Screen Inc., a U.S.-based manufacturer of solar panels, is planning to build a new manufacturing facility in one of five possible locations: Mexico, India, China, Greece, or Argentina.

The cost of building a facility will vary, depending on the country€™s economic, social, and political climate and currency exchange rates. As Table F.21 shows, Sun Screen has estimated the cost (in millions of U.S. dollars) of building a facility in each country under two different economic climates. The probability of a favorable climate is 0.55, and the probability of an unfavorable one is 0.45.

Table F.21

Values are in millions.
Determine the best lowest-cost decision using the following decision criteria:

1. The Laplace criterion

2. The maximin criterion

3. The maximax criterion

4. The Hurwicz criterion (α = 0.4)

5. The minimax regret criterion

Because the table consists of costs instead of revenues, the reverse logic applies. In other words, instead of the option with the highest value, the firm will want to choose the option with the lowest cost value. For example, the maximax criterion becomes the minimin criteria, which means you will choose the minimum of the minimum costs, and so on.

Transcribed Image Text:

Economic, Social, and Political Climate Country Favorable Unfavorable Mexico $20.0 $16.0 $22.0 India $21.0 China $17.0 $25.0 $18.0 Greece $14.0 Argentina $19.0 $20.0