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Decision Theory: Marlow Manufacturing | BUS216 REV SP19 Marlow Manufacturings CEO Manny Marlow is trying to make a decision

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Answer #1

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If Manny knew the perfect information about the market then his decision will be

Expand production when demand is high. No change when demand is high and reduce production when demand is low.

2

a.

In case maximax we need to choose the maximum value of each decision and then choose the decision with the maximum value among them. The maximum values for each decision are 10, 7 and 5. The maximum out of them is 10 by expanding production.

The decision will be to expand production.

b.

In case of maximin, we need to determine the minimum value for each decision and then choose the maximum value among them. The minimum values are (2), 2, and (9) for each decision. The maximum among them is 2 when we do not change.

The decision will to not change production.

c.

In minimax regret, we first need to create a regret table. This is the difference between maximum value and the value in a column. The regret table is shown below.

High Moderate Low
Expand 0 0 8
No change 3 3 4
Reduce 19 12 0

Here first choose the maximum regret value for each decision. They are 8, 4, and 12. Among them the minimum is 4. Thus the decision will be to not change production.

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