Payoff and Opportunity Loss Tables
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In the following payoff and opportunity loss tables circle and label the payoff or loss associated with the following decision-making criteria under uncertainty.
a. maximax
b. maximin
c. equally likely
d. minimax
Payoff Table
State of Nature
Alternatives A B Row Average
1 100 150 125
2 175 125 150
Opportunity Loss Table
State of Nature
Alternatives A B
1 75 0
2 0 25
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Solution Summary
The solution provides step by step method for the calculation of decision-making criteria under uncertainty. Formula for the calculation and Interpretations of the results are also included.
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a. Maximax
The Maximax criterion looks at the best possible results. Maximax means 'maximize the maximum profit'.
State of Nature
Alternatives A B Maximum Profit
1 100 150 150
2 175 125 175
Hence the alternatives 2 would be chosen as the best decision using the maximax criterion
b. Maximin
The maximin decision rule suggests ...
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