Question

Question 16 Ny wed and out of 6.00 Flag question Todays lectronics specializes in manufacturing modern electronic components. I spent that produces the components. Phyllis Weinberger, who is responsible president of Todays Flectronics on electronic manufacturing equipment, has devele following table concerning a proposed facility: Large facility Medium sized facility Small facility No facility STRONG MARKET 550,000 PROFIT (5) FAIR POOR MARKET MARKET 110,000 - 310,000 300,000 200,000 129,000 100,000 - 100.000 -32,000 (a) What is the maximax decision? (b) What is the maximin decision? What is the equally likely decision? What is the criterion of realism decision? Use and value of 0.8. Develop an opportunity loss table. What is the minimax regret decision? Paragach - BI E 5:12 PM E

Answer 1

(a) Maximax Decision. The Maximax Criterion Theory is used to find out the option that maximises the maximum payoff. Profit ($) Fair Market Facility Strong Market Poor Market Large Facility Medium Sized Small Facility No Facility 550000 300000 200000 110000 129000 100000 0 -310000 -100000 -32000 0 Maximum in Row 550000 Maximax 300000 200000 The Maximax Decision is Large Facility. (b) Maximin Decision. The Maximin Criterion Theory is used to find out the option that maximises the minimum payoff. Profit ($) Fair Market Minimum in Row Faciltity Strong Market Poor Market Large Facility Medium Sized Small Facility 550000 300000 200000 110000 129000 100000 -310000 -100000 -32000 -310000 -100000 -32000 No Facility 0 0 Maximin The Maximin Decision is No Facility (c) Equally Likely Decision. The Equally Likely Criterion Theory is used to find out the option that provides the highest of the average payoffs. Profit ($) Strong MarketFair Market Faciltity Poor Market Large Facility Medium Sized Small Facility No Facility 550000 300000 200000 110000 129000 100000 0 Average of the Row 116667 Equally Likely 109667 89333 -310000 -100000 -32000 The Equally Likely Decision is Large Facility (c) Criterion of Realism Decision. The Criterion of Realism Theory is a compromise between the Maximax and Maximin Decision. It uses a to measure the degree of optimism of the decision maker. Profit ($) Fair Market Faciltity Strong Market Criterion of Poor Market Realism* (a=0.8) | 378000 Criterion of -310000 Realism -100000 220000 -32000 153600 Large Facility Medium Sized Small Facility No Facility 550000 300000 200000 110000 129000 100000 0 * Criterion of Realism (Weighted Average) Weighted Average = (a) * (Maximum in Row) + (1-a) * (Minimum in Row) Large Faciltiy Weighted Average = 0.8 * 550000 +0.2*-310000 = 378000 Medium Sized Weighted Average = 0.8 * 300000 +0.2*-100000 = 220000 Small Facility Weighted Average = 0.8 * 200000 +0.2*-32000 = 153600 No Facility Weighted Average = 0. 80 +0.2 * 0 = 0 The Criterion of Realism Decision is Large Facility. (d) Opportunity Loss Table. Opportunity Loss for any nature/facility is calculated by subtracting the each payoff in the column from the best payoff in the same column. Profit ($) Fair Market Faciltity Strong Market Poor Market 19000 (550000-550000) (129000-110000) 310000 (0-4-310000)) Large Facility 0 250000 (550000-300000) (129000-129000) 100000 (0-(-100000) Medium Sized Small Facility 350000 29000 (550000-200000) (129000-100000) 550000 129000 (550000-0) (129000-0) 32000 (0-4-32000)) U No Facility (0-(-0) (e) Minimax Regret Decision. The Minimax Regret Decision Criterion Theory is used to find out the option that minimises the maximum opportunity loss. Profit ($) Fair Market Maximum in Row Faciltity Strong Market Poor Market Large Facility 19000 (550000-550000) (129000-110000) 310000 (0-(-310000)) 310000 250000 0 (550000-300000) (129000-129000) 100000 250000 (0-(-100000)) Minimax Regret Medium Sized Small Facility 350000 29000 (550000-200000) (129000-100000) 550000 129000 (550000-0) (129000-0) 32000 (0-4-32000)) 350000 No Facility (0-(-0) 550000 The Minimax Regret Decision is Medium-Sized Facility.