A chained bread company is considering developing new products, which defines the alternatives, and currently there are four types of products that can be possibly considered. The new products will be sold in different channels including supermarkets, Japanese restaurants, Italian restaurants, and hotels, which defines the states of nature. You are given the following payoff table measured in terms of profit.

1. Suppose there is no probability, answer the following questions in a decision analysis problem.

1. Which alternative should be chosen under Maximax strategy?

2. Which alternative should be chosen under Maximin strategy?

3. Construct an opportunity loss table (regret table) and determine the best alternative using Minimax Regret strategy.

4. If you want to maximize the expected payoff, which alternative should be chosen? Show your calculation steps.

2. Suppose that the following probabilities can be achieved from previous study, the probabilities of S1, S2, S3 and S4 are 0.15, 0.2, 0.3, and 0.35 respectively.

1. If you want to maximize the expected payoff, which alternative should be chosen? Find the maximum expected value.

2. If the cost to get the perfect information is open to negotiation, how large can the upbound cost be?

State of Nature S22 S10 S34 S4 252 Product Alternatives Ale A24 A32 A42 202 252 17 30 142 224 232 142 212 224 272 224 222 292 262