Bradley Architectural, a primarily residential architectural firm, was just notified of an urgent request for a development proposal on a property. They are almost certain that the proposal will go to a competitor, who has been involved with the project since the beginning, but they have 2 days to bring their ideas to the table if they wish to. They are trying to decide what they should propose, if anything. Determine what choice they should make using the Hurwicz at α = 0.05 and at = 0.1, to represent their pessimism about winning the contract. What are the expected values? What choice should they make if they thought they had an equal chance of winning? What would be the expected value?
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Decision
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Win contract
|
Lose contract
|
|
Business proposal
|
$2,542,000
|
-$24,600
|
|
Mixed proposal
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$2,316,000
|
-$20,950
|
|
Residential proposal
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$2,150,000
|
-$2,000
|
|
No proposal
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$0
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$0
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