Joy who owns a boutique is considering three options for her facility next year. She can expand her current shop, move to a larger facility, or make no change. With a favourable market, the monthly payoff in Kenya shillings would be 56000 if she expands, 70000 if she moves, and 30000 if she does nothing. With an average market, her payoff will be 21000, 35000, and 10000 respectively. With an unfavourable market, her payoff will be -29000, -45000, and 5000 respectively. i) Prepare the payoff table ii) Using the following criteria advise joy on which decision alternative to take: 1. Maximax criterion 2. Maximin criterion 3. Hurwicz criterion with a = 0.6 4. LaPlace criterion 5. minmax regret criterion 2
Joy who owns a boutique is considering three options for her facility next year. She can expand her current shop, move to a larger facility, or make no change. With a favourable market, the monthly payoff in Kenya shillings would be 56000 if she expands, 70000 if she moves, and 30000 if she does nothing. With an average market, her payoff will be 21000, 35000, and 10000 respectively. With an unfavourable market, her payoff will be -29000, -45000, and 5000 respectively. i) Prepare the payoff table ii) Using the following criteria advise joy on which decision alternative to take: 1. Maximax criterion 2. Maximin criterion 3. Hurwicz criterion with a = 0.6 4. LaPlace criterion 5. minmax regret criterion 2
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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