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Robert Ragsdale is trying to decide if he should purchase repair and replacement insurance on a new laptop computer that he is planning to purchase. The policy costs $400.00 at the time of purchase, and over the next three years will replace the laptop if it is stolen or repair it if it is broken. The following table contains the total costs of this decision.  Which alternative is best, according to each of the following decision criteria? Maximin Maximax Laplace Minimax regret

Robert Ragsdale is trying to decide if he should purchase repair and replacement insurance on a new laptop computer that he is planning to purchase. The policy costs $400.00 at the time of purchase, and over the next three years will replace the laptop if it is stolen or repair it if it is broken. The following table contains the total costs of this decision.  Which alternative is best, according to each of the following decision criteria? Maximin Maximax Laplace Minimax regret

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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Robert Ragsdale is trying to decide if he should purchase repair and replacement insurance on a new laptop computer that he is planning to purchase. The policy costs $400.00 at the time of purchase, and over the next three years will replace the laptop if it is stolen or repair it if it is broken. The following table contains the total costs of this decision. 

Which alternative is best, according to each of the following

decision criteria?

  1. Maximin
  2. Maximax
  3. Laplace
  4. Minimax regret
### Decision Matrix for Computer Insurance This table provides a financial comparison of two alternatives regarding computer insurance under various circumstances: #### Alternatives: 1. **Buy the Insurance** 2. **Do Not Buy the Insurance** #### Circumstances and Costs: - **Computer Is Stolen** - *Buy the Insurance*: $2,900.00 - *Do Not Buy the Insurance*: $5,000.00 - **Computer Breaks** - *Buy the Insurance*: $2,900.00 - *Do Not Buy the Insurance*: $3,100.00 - **Computer Neither Breaks Nor Is Stolen** - *Buy the Insurance*: $2,900.00 - *Do Not Buy the Insurance*: $2,500.00 ### Analysis: - **Buying the Insurance**: Provides a consistent cost of $2,900.00 across all scenarios, offering financial protection against theft or damage. - **Not Buying the Insurance**: Results in higher costs if the computer is stolen or breaks but offers a lower cost of $2,500.00 if nothing happens. This table helps assess the cost-benefit analysis of purchasing insurance for a computer based on potential risks and financial outcomes.
Transcribed Image Text:### Decision Matrix for Computer Insurance This table provides a financial comparison of two alternatives regarding computer insurance under various circumstances: #### Alternatives: 1. **Buy the Insurance** 2. **Do Not Buy the Insurance** #### Circumstances and Costs: - **Computer Is Stolen** - *Buy the Insurance*: $2,900.00 - *Do Not Buy the Insurance*: $5,000.00 - **Computer Breaks** - *Buy the Insurance*: $2,900.00 - *Do Not Buy the Insurance*: $3,100.00 - **Computer Neither Breaks Nor Is Stolen** - *Buy the Insurance*: $2,900.00 - *Do Not Buy the Insurance*: $2,500.00 ### Analysis: - **Buying the Insurance**: Provides a consistent cost of $2,900.00 across all scenarios, offering financial protection against theft or damage. - **Not Buying the Insurance**: Results in higher costs if the computer is stolen or breaks but offers a lower cost of $2,500.00 if nothing happens. This table helps assess the cost-benefit analysis of purchasing insurance for a computer based on potential risks and financial outcomes.
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