Decision Theory: Practice Computational Problems Problem 1: A manufacturing firm is considering three potential strategies for the upcoming year. The possible payoffs for these strategies will vary according to demand as follows: Low demand Moderate demand High demand Add capacity 5 13 Hold capacity -2 6 constant Reduce capacity 3 7 8 a) Which strategy is best according to the maximax criterion? b) Which strategy is best according to the maximin criterion? c) Which strategy is best according to the Laplace criterion? d) Which strategy is best according to the minimax regret criterion? Problem 3: A manufacturing firm is considering three potential strategies for the upcoming year. The possible payoffs for these strategies will vary according to demand as follows: Low demand (30%) Moderate demand (40%) High demand (30%) Add capacity -3 5 13 Hold capacity -2 6 constant Reduce capacity 3 7 8 a) What is the expected monetary value (EMV) of the best strategy? b) What is the expected value of perfect information (EVPI)?