Purchase Solution

Choosing an alternative

Not what you're looking for?

Ask Custom Question

A small building contractor has recently experienced two successive years in which work opportunities exceed the firm capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below.

Which alternative should be selected if decision criteria are...????

a) Maximax?
b) Maximin?
c) Laplace?
d) Minimax regret?

next year demand
Alternative low high

Do nothing 50 60
Expand 20 80
Subcontract 40 70

(profit in thousands)

Purchase this Solution
Solution Summary

Solution describes the steps to choose an alternative based upon given decision criteria.

Solution Preview

Please refer attached file/s for better clarity of tables.

a) Maximax?

Let us find maximum profit in case of each alternative.
Alternatives Next Year Demand
Low High Maximum Profit
Do nothing 50 60 60
Expand 20 80 80
subcontract 40 70 70

We find that maximum of maximum payoffs from is 80 thousand.
So, decision should be Expand.

b) Maximin?
Let us find minimum profit in case of each alternative.

Alternatives ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Operations Management

This quiz tests a student's knowledge about Operations Management

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • Choosing Between Alternative Brands

    487322 Choosing Between Alternative Brands What would be the evaluative criteria that target markets would use when choosing between alternative brands? Let's look at some of those criteria and what they mean. 1.

  • XYZ Corporation

    After-tax return = 10%(1 - 0.35) = 6.50% From the above, we can see that Alternative 2 is the best investment alternative.

  • Economics in global environment

    For making a choice of becoming an MBA, my opportunity cost is all the benefits of becoming a CA which I foregone because of choosing this option.

  • Testing One Variable's Data

    Perform a t-test by formulating a null and an alternative statement, choosing an acceptable significance value, determining the appropriate critical value, selecting the test statistic and determining its value from the sample data, comparing the observed

  • Alternative Income Statements and Decision Making

    375241 Alternative Income Statements and Decision Making Question 1: What are some examples of how alternative income statements are used in decision making? What are the two types of approaches in using alternative income statements?

  • Which is the best investment, After-Tax Returns, for ABC Cor

    This solution is comprised of a detailed explanation to answer what is the after-tax return on the best investment alternative.

  • Economics and management

    than the one currently being made D. the amount that is given up when choosing an activity that is not as good as the next best alternative 9.

  • Sample testing- American Workers Job Satisfaction

    Perform a t-test by formulating a null and an alternative statement, choosing an acceptable significance value, determining the appropriate critical value, selecting the test statistic and determining its value from the sample data, comparing the observed

  • After- tax returns

    The corporation is choosing between the following three equally risky securities: Alachua county tax-free municipal bonds yielding 6 percent; Exxon bonds yielding 9.5 percent; GM preferred stock with a dividend yield of 9 percent.

  • AIU Database Job Satisfaction

    I chose the extrinsic Perform a t-test by formulating a null and an alternative statement, choosing an acceptable significance value, selecting the test statistic and determining its value from the sample data, comparing the observed value to the critical

View More Related Solutions