Restaurateur is going to set up a cream tea stall at a local Feven. On the morning of the Feven she visits the wholesale market and has to decide whether to buy large, medium or small quantities of strawberries, scones, cream and other materials.  Her profit depends on the number of people attending the Feven, and this in turn depends on the weather. If her matrix of gains (in thousands of Birrs) for different weather conditions is given below, Based on Maximax, Minimax, Maximin,  Laplace and Hurwitz Criterion (α = 0.7).

What quantity of materials should she buy? Take for α = 0.75

	Evenly-weather is
Alternative -buy	Good	Average	Poor
Large quantity	10	4	-2
Medium quantity	7	6	2
Small quantity	4	1	4

 

Consider the following stereotype investment decision making example, what action to take among three possible courses of action with the given rates of return as shown in the body of the table with the decision criterion. 

Pessimism, or Conservative (MaxMin)

Optimism or Aggressive (MaxMax).

Coefficient of Optimism (Hurwicz's Index)

Minimax Regret(Savag's Opportunity Loss)

 

	State of nature during one year
Actions		Growth	Medium Growth	No   growth	Low Growth
	Bonds	12 %	8%	7%	3%
	Stocks	15%	9%	5%	-2%
	Deposits	7%	7%	7%	7%

 

 

Suppose that you have the following payoff ma­trix:

 

	Event
Action	E1	E2	E3	E4	E5
A1	-100	160	40	200	0
A2	60	80	80	40	100
A3	20	60	60	20	80
A4	-20	-100	-140	-40	400

Select the optimal action by applying maximin, maximax, Hurwicz (= 0.3 ), minimax regret and the Laplace criteria?

 

Answer rating: 100% (QA)

Lets solve each of the decisionmaking scenarios using the provided decision criteria Scenario 1 Cream Tea Stall Quantity Decision Given the matrix of gains for different weather conditions Alternative ... View the full answer