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 two possible outcomes $($states of nature$)$ that IdBL faces which are favourable market

or unfavourable market. These alternatives and these possible outcomes give different conditional

payoffs$/$profits$.$ The decision table below summarises the conditional payoffs for IdBL.

$3$

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

$3\mathrm{.}2$ Suppose IdBL sets its coefficient of realism $()$ at $0\mathrm{.}8,$ what alternative will constitute IdBL's best

decision? Show all calculations.

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

$3\mathrm{.}4$ Suppose IdBL believes that the probability of realising a favourable market is the same as that of realising

an unfavourable market, which alternative will IdBL adopt using the expected monetary value $($EMV$)$

approach in decision$-$making? Show calculations.