Question

Today’s Electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the components. Phyllis Weinberger, who is responsible for advising the president of Today’s Electronics on electronic manufacturing equipment, has developed the following table concerning a proposed facility:

Payoffs	Outcomes
Large facility	550,000	-310,000
Medium-sized facility	300,000	-100,000
Small facility	200,000	-32,000
No facility	0	0

           

1. Develop an opportunity loss table.
2. What is the minimax regret decision?

Answer 1

(a)

Calculations

(b)

Find the 'Max regret' for each row. Then find the minimum of the maximums.

So, based on the minimax regret decision rule, the best alternative is the 'medium-sized facility'.