A business owner is trying to decide whether to buy, rent, or lease office space and has constructed the following payoff (profit in thousands of dollars) table based on whether business will be brisk, medium, or slow.
Business Level
Decision Brisk Medium Slow
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Buy 100 40 20
Rent 60 50 60
Lease 40 55 50
(a) What is the best decision using the maximax criterion? What is the payoff for it?
(b) What is the best decision using the maximin criterion? What is the payoff for it?
(c) What is the best decision using the minimax regret criterion? What is the regret for it?
(d) What is the best decision using the Hurwicz’s criterion if α = 0.3? What is the payoff for it?