1. Hudson Corporation is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on on-demand as follows:

		Demand
Staffing Options	S1 - High	S2 - Medium	S3 - Low
d1 - Own staff	650	650	600
d2 - Outside vendor	900	600	300
d3 - Combination	800	650	500

If the decision-maker knows nothing about the probabilities of the three states of nature, what is the recommended decision using:

(a) the optimistic approach?

(b) the conservative approach?

(c) Fill in a minimax regret table on your scrap paper. Put the Maximum Regrets in the table below.

Staffing Options	Max Regret Cost, ($1000s)
d1 - Own staff
d2 - Outside vendor
d3 - Combination

(d) What is the recommended decision minimax regret approach?