A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment: Gasoline Availability Investment Shortage Stable Supply Surplus Motel $-8,000 $15,000 $20,000 Restaurant 2,000 8,000 6,000 Theater 6,000 6,000 5,000 Determine the best investment, using the following decision criteria. (a) Maximax (b) Maximin (c) Hurwicz (use a -0.4) (d) Equal likelihood

ENGR.ECONOMIC ANALYSIS
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Author:NEWNAN
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Chapter1: Making Economics Decisions
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A local real estate investor in Orlando is considering three
alternative investments: a motel, a restaurant, or a theater. Profits
from the motel or restaurant will be affected by the availability
of gasoline and the number of tourists; profits from the theater
will be relatively stable under any conditions. The following
payoff table shows the profit or loss that could result from each
investment:
Gasoline Availability
Investment
Shortage
Stable Supply
Surplus
Motel
$-8,000
$15,000
$20,000
Restaurant
2,000
8,000
6,000
Theater
6,000
6,000
5,000
Determine the best investment, using the following decision
criteria.
(a) Maximax
(b) Maximin
(c) Hurwicz (use a -0.4)
(d) Equal likelihood
Transcribed Image Text:A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment: Gasoline Availability Investment Shortage Stable Supply Surplus Motel $-8,000 $15,000 $20,000 Restaurant 2,000 8,000 6,000 Theater 6,000 6,000 5,000 Determine the best investment, using the following decision criteria. (a) Maximax (b) Maximin (c) Hurwicz (use a -0.4) (d) Equal likelihood
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