Dilworth Developers (DD) is planning to build a condominium development on Orchard Grove, Virginia. The company is trying to decide between building a small, medium, or large development. The payoffs received for each size of development will depend on the market demand for condominiums in the area, which could be low, medium, or high. The payoff matrix for this decision problem is:

The owner of the company estimates a 20% chance that market demand will be low, a 35% chance that it will be medium, and a 45% chance that it will be high.

a. What decision should be made according to the maximax decision rule?

b. What decision should be made according to the maximin decision rule?

c. What decision should be made according to the minimax regret decision rule?

d. What decision should be made according to the EMV decision rule?

e. What decision should be made according to the EOL decision rule?

Size of Development Small Medium Large Low 400 200 -400 Market Demand Medium 400 500 High 400 500 800 300 (Payoffs in $1000s)