Inter$-$district Bus Line $($IdBL$),$ a new firm that entered the transport service provision market in the Free State

Province is considering some alternatives to consolidate its power in the province. Three alternatives in this

decision$-$making process are on the table. These are: increasing comfort in the bus such that passengers can

watch TV while traveling and lure more customers $[$alternative $1]$; increasing the bus fleet such that with more

buses, the time interval between each bus is reduced $[$alternative $2],$ and lastly, keep the status quo $[$alternative

$3].$ There are three possible outcomes $($states of nature$)$ that IdBL faces which are good market; average market

or bad market. These alternatives and these possible outcomes give different conditional payoffs$/$profits$.$ The

decision table below summarises the conditional payoffs for IdBL.

$3\mathrm{.}1$ Use the maximax criterion to identify the alternative that IdBL will adopt.

$3\mathrm{.}2$ Use the maximin criterion to identify the alternative that IdBL will adopt.

$3\mathrm{.}3$ Suppose the probabilities for the three possible market conditions are $0\mathrm{.}2$ for a good market, $0\mathrm{.}5$ for an

average market and $0\mathrm{.}3$ for a bad market. Which alternative will IdBL adopt using the expected monetary

value $($EMV$)$ approach in decision$-$making? Show all calculations.

$3\mathrm{.}4$ Showing all calculations, identify the best alternative according to the Laplace decision criterion.

Assume that IdBL wishes to apply the minimax regret criterion when identifying the best alternative. First,

define what opportunity loss entails. Second, prepare the IdBL's Opportunity Loss Table by populating the

table below $($i$.$e$.$ values of $A$ to $H).$ Last, indicate the best alternative according to the minimax regret

criterion.

Opportunity Loss Table for IdBL