Question

The following is an opportunity loss table. States of Nature Alternatives A B C Alternative 1 90 0 130 Alternative 2 140 70 180 Alternative 3 0 50 0 Do Nothing 200 150 250 What decision should be made based on the minimax regret criterion?

	A	B	C
ALTERNATIV1	90	0	130
ALTERNATIV2	140	70	180
ALTERNATIV3	0	50	0
DO NOTHING	200	150	250

Answer 1

Here we want to take the decision on the basis of the minimax regret criterion.

So first we need to select maximum regret of each of the alternative and choose the minimum.

For ALTERNATIVE1 maximum regret is 130

For ALTERNATIVE2 maximum regret is 180

For ALTERNATIVE3 maximum regret is 50

For DO NOTHING maximum regret is 250

The minimum of them is 50 which is correspond to the ALTERNATIVE3 .

So best choice on the basis of  minimax regret criterion is ALTERNATIVE3