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For each situation, find the decisions using: • the optimistic approach • the conservative approach • The minimax regret approach

For each situation, find the decisions using: • the optimistic approach • the conservative approach • The minimax regret approach

Practical Management Science
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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For each situation, find the decisions using: - The optimistic approach - The conservative approach - The minimax regret approach **A, B, C, and D are states of nature. X, Y, Z, and Q are decision alternatives.** **Situation 1:** ``` A B X 10 -9 Y 7 14 Z -2 6 ``` **Situation 2:** ``` A B C X 10 -3 -7 Y -7 13 5 Z 6 -6 9 ``` Explanation: - **Optimistic Approach**: Selects the decision with the highest possible payoff. - **Conservative Approach**: Selects the decision with the highest minimum payoff to guard against the worst-case scenario. - **Minimax Regret**: Involves constructing a regret table based on the payoffs and then selecting the decision with the minimum of the maximum regrets.
Transcribed Image Text:For each situation, find the decisions using: - The optimistic approach - The conservative approach - The minimax regret approach **A, B, C, and D are states of nature. X, Y, Z, and Q are decision alternatives.** **Situation 1:** ``` A B X 10 -9 Y 7 14 Z -2 6 ``` **Situation 2:** ``` A B C X 10 -3 -7 Y -7 13 5 Z 6 -6 9 ``` Explanation: - **Optimistic Approach**: Selects the decision with the highest possible payoff. - **Conservative Approach**: Selects the decision with the highest minimum payoff to guard against the worst-case scenario. - **Minimax Regret**: Involves constructing a regret table based on the payoffs and then selecting the decision with the minimum of the maximum regrets.
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