Question

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows: NUMBER OF EXAMINERS One Two Three COMPLIANCE LOW NORMAL 50 50 100 60 150 70 HIGH 50 20 -10

Please use table for reference to the following questions:

1. Using the Conservative (Aka maximin) strategy: What is the net revenue (in thousands of dollars) under the Worst-case scenario for one examiner?

2. Using the Conservative (Aka maximin) strategy: What is the net revenue (in thousands of dollars) under the Worst-case scenario for two examiners?

3. Using the Conservative (Aka maximin) strategy: What is the net revenue (in thousands of dollars) under the Worst-case scenario for two examiners?

4. If she uses the conservative (aka Maximin) strategy, how many new examiners will she decide to hire?

5. Using the opportunity-loss (aka minmax regret) strategy: What is the maximum regret if one examiner is hired?

6. Using the opportunity-loss (aka minmax regret) strategy: What is the maximum regret if two examiners are hired?

7. Using the opportunity-loss (aka minmax regret) strategy: What is the maximum regret if two examiners are hired?

8. If she uses the opportunity-loss (aka minmax regret) strategy, how many new examiners will she decide to hire?

Answer 1

Answer 1 :

Using the Conservative (Aka maximin) strategy The net revenue (in thousands of dollars) under the Worst-case scenario for one examiner is 50. (minimum)

Answer 2 :

In maximin criterion, we first determine the worst case of choosing an alternative. If we select two examiners, the worst case is high compliance and the value is 20

Answer 3 :

The Maximin approach is the maximum of the minimum payoffs from all the alternatives. This means we need to find the worst case for each alternative. then out of all the worst case payoffs, we need to elect the best payoffs. This is known as the conservative approach.

For the given scenario, the maximin outcome is = 50 for the one as below

	Compliance		Worst	Maximin
No. of examiners	Low	Normal	High
One	50	50	50		50	Best among all the worst payoffs is 50. Thus as per maximin criteria, we need to select the best among all the worst in each alternatives.
Two	100	60	20		20
Three	150	70	-10		-10

The Net revenue under the worst case scenario for the three examiners is -10 payoffs, for the high compliance category. Because in Three Examiners scenario, the high category got the worst case pay-off. Thus High category with (-10) as the worst case pay off Three Examiner scenario.

Answer 4 :

One

Under the Maximin criterion, the maximum of the minimum payoffs for each option is selected.

In this case, the minimum revenue for each option ie One Examiner, Two Examiners, and Three Examiners has to be identified. Then the maximum revenue of the three minimum revenues has to be selected.

The minimum revenue for One Examiner = 50

The minimum revenue for Two Examiners = 20

The minimum revenue for Three Examiners = -10

Among the above mentioned 3 minimum revenues, the maximum revenue is 50, which is for One Examiner. So One Examiner be selected.

Therefore,

If the local operation manager uses the maximin criteria, she would decide to hire One new examiner.

______________________________________________________________________________

Please Please up vote this answer. Please. Thank you so much. Please up vote.