A dance company wants to choose the location for a new studio. Profits obtained will depend on whether the city bus service adds a stop in front of the building where the studio will be located. The following payoff table summarizes the relevant information: Alternatives Stop is added Stop is not added Address 1 $100,000 $10,000 Address 2 $120,000 $190,000

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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A dance company wants to choose the location for a new studio. Profits obtained will depend on whether the city
bus service adds a stop in front of the building where the studio will be located. The following payoff table
summarizes the relevant information:
Alternatives
Stop is added
Stop is not added
Address 1
$100,000
$10,000
Address 2
$120,000
$190,000
Address 3
$150,000
$150,000
Address 4
$200,000
$230,000
If the dance company manager is risk-averse, and has only the above information to work with, which criterion
should they use to make their decision?
O The maximin criterion
O The maximax criterion
O The expected monetary value criterion
D A decision tree
Transcribed Image Text:A dance company wants to choose the location for a new studio. Profits obtained will depend on whether the city bus service adds a stop in front of the building where the studio will be located. The following payoff table summarizes the relevant information: Alternatives Stop is added Stop is not added Address 1 $100,000 $10,000 Address 2 $120,000 $190,000 Address 3 $150,000 $150,000 Address 4 $200,000 $230,000 If the dance company manager is risk-averse, and has only the above information to work with, which criterion should they use to make their decision? O The maximin criterion O The maximax criterion O The expected monetary value criterion D A decision tree
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