1. A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state. no new plants 1 new plant 2 new plants State of Economy expands $20 million $30 million $40 million Which option would the firm choose under each of the following rules? a. Maximax rule b. Maximin rule C. Minimax regret rule d. Equal probability rule contracts -$ 3 million -$6 million -$12 million unchanged $4 million $6 million $8 million

1. A firm is considering the decision of investing in new plants. The following is the profit payoff matrix under three conditions: it does not expand, it builds two new plants, or it builds one new plant. Three possible states of nature can exist--no change in the economy, the economy contracts and the economy grows. The firm has no idea of the probability of each state. no new plants 1 new plant 2 new plants State of Economy expands $20 million $30 million $40 million Which option would the firm choose under each of the following rules? a. Maximax rule b. Maximin rule C. Minimax regret rule d. Equal probability rule contracts -$ 3 million -$6 million -$12 million unchanged $4 million $6 million $8 million

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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