Problem 2: A local real estate investor is considering three alternative investments: a motel, a restaurant, or a theater. Profits will be determined by the state of the economy (whether people will travel, spend on entertainment, etc.) The table shows the profit or loss that could result from each investment alternative: PAYOFFS Alternatives Motel Restaurant Theater State of Economy Weak Average Strong -$12,000 $20,000 $25,000 $5,000 $15,000 $4,000 $7,000 $10,000 $3,000 (a) (b) (C) (d) Which option should Joe choose if he uses the maximax criterion? Which option should Joe choose if he uses the maximin criterion? Which option should Joe choose if he uses the equally likely criterion? Which option should Joe choose if he uses the criterion of realism with a = 0.4? Which option should Joe choose if he uses the minimax regret criterion? Joe has gathered some more information. The probabilities of Good, Average, and Poor market conditions are 0.35, 0.55, and 0.1, respectively. (f) Using EMV's, what option should Joe choose? What is the maximum EMV value? Using EOL, what option should Joe choose? What is the minimum EOL value? Compute the EVPI and show that it is the same as the minimum EOL. (h)