Question: how could we get the minimax rule for the question 1 A manufacturer is interested in ordering a new machine. His old machine operates at

how could we get the minimax rule for the question 1

A manufacturer is interested in ordering a new machine. His old machine operates at a pro-

duction cost of $2000. The new machine requires an installation cost of $1000 and operates at

a production cost of 2 thousand dollars, for some unknown theta2 (0; theta). Its production error

is normal with zero mean and variance theta2. He is allowed to take one single observation of the

production error using the new machine before placing order. What is the minimax decision

rule for the manufacturer?

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