Chapter $12$ Homework

Modesto Appliances is going to introduce one of three new products: a microwave, a toaster, or a

radio. The market conditions $($favorable$,$ stable, or unfavorable$)$ will determine the profit or loss

the company realizes, as shown in the following payoff table.

Determine what product the company should introduce using the following decision criteria.

a$-$ Maximax

b$-$ Maximin

c$-$ Minimax Regret

d$-$ Equal likelihood

e$-$ Hurwicz $(=3)$

f$-$ Compute the expected value for each decision and select the best one.

g$-$ Develop the opportunity loss table and compute the expected opportunity loss for each

product.

h$-$ Determine how much the firm would be willing to pay to a market research firm to gain

better information about future market conditions.