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Qualitative Methods and Decision Theory

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The following payoff table shows the profit for a decision problem with three states of nature and two decision alternatives:

State of Nature
Decision Alternatives s1 s2 s3
d1 -20 40 100
d2 10 45 70

I need to determine what is the recommended decision using

a. The optimistic approach?
b. The conservative approach?
c. The minmax regret approach?

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Solution Summary

This solution provides a brief, but concise response which illustrates how to utilize both the conservative and optimistic approach in order to reach a decision.

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Optimistic approach (maximax approach )

s1 s2 s3 Maximum

d1 20 40 100 100

d2 10 45 70 70

Decision ...

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