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    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 Preview

    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 ...

    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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