Question

Lot Type
	Minimal	Intermediate	Heavy
Probability	20%	30%	50%
Compact Cars	$ 41,000	$ 27,000	$ 17,000
Non-compact Cars	-65000	26000	71000
Trailers	12000	37000	57000
Employee Cost	32000	25000	6000

Question:

Lot Type Decision: Amount Variable Name Maximax decision Maximin decision Equal Likelihood Compact Cars Non- compact Cars Trailes Employee Cost Choose

Answer 1

In Maximax (Optimistic) criterion we look for best possible payoff for each variable, and for among them chose the best one.

Here the best payoffs for each variable are -

Compact Cars - $ 41,000

Non-Compact Cars - $ 71,000

Trailers - $ 57,000

Employee Cost - $ 32,000

Amongst the above variable the best possible value is $ 71,000 for Non-Compact Cars.

Hence in Maximax condition, Amount = $ 71,000 & Variable Name - Non-Compact Cars.

In Maximax (Optimistic) criterion we look for best possible payoff for each variable, and for among them chose the best one.

Here the best payoffs for each variable are -

Compact Cars - $ 41,000

Non-Compact Cars - $ 71,000

Trailers - $ 57,000

Employee Cost - $ 32,000

Amongst the above variable the best possible value is $ 71,000 for Non-Compact Cars.

Hence in Maximax condition, Amount = $ 71,000 & Variable Name - Non-Compact Cars

In Maximin (Conservative) criterion we look for worst possible payoff for each variable, and for among them chose the best one.

Here the best payoffs for each variable are -

Compact Cars - $ 17,000

Non-Compact Cars - $ -65,000

Trailers - $ 12,000

Employee Cost - $ 6,000

Amongst the above variable the best possible value is $ 17,000 for Compact Cars.

Hence in Maximax condition, Amount = $ 17,000 & Variable Name - Compact Cars