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Decision: Maximax, Maximin, Hurwicz, Equal Likelihood

1. The owner of the Burger Doodle Restaurant is considering two ways to expand operations: open a drive up window or serve breakfast. The increase in profits resulting from these proposed expansions depends on whether a competitor opens a franchise down the street. The possible profits from each expansion in operations, given both future competitive situations, are shown in the following payoff table:

Competitor
Decision Open Not Open
Drive-up window $-6,000 $20,000
Breakfast 4,000 8,000

Select the best decision, using the following decision criteria.
a. Maximax
b. Maximin

2. The Oakland Bombers professional basketball team just missed making the playoffs last season and believes it needs to sign only one very good free agent to make the playoffs next season. The team is considering four players: Barry Bond, Rayneal O'Neil, Marvin Johnson, and Michael Gordon. Each player differs according to position, ability, and attractiveness to fans. The payoffs (in $1,000,0000s) to the team for each player, based on the contract, profits from attendance, and team product sales for several different season outcomes, are provided in the following table:
Season Outcome
Player Loser Competitive Makes Playoffs
Byrd $-3.2 $ 1.3 4.4
O'Neil -5.1 1.8 6.3
Johnson -2.7 0.7 5.8
Gordon -6.3 -1.6 9.6

Determine the best decision, using the following decision criteria.
a. Maximax
b. Maximin
c. Hurwicz (α = .60)
d. Equal likelihood

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1 The owner of the Burger Doodle Restaurant is considering two ways to expand operations: open a drive up window or serve breakfast. The increase in profits resulting from these proposed expansions depends on whether a competitor opens a franchise down the street. The possible profits from each expansion in operations, given both future competitive situations, are shown in the following payoff table:
Competitor
Decision Open Not Open
Drive-up window ($6,000) $20,000
Breakfast 4,000 8,000

Select the best decision, using the following decision criteria.
a. Maximax
b. Maximin

a. Maximax

Maximax strives to maximize profits by choosing the option with the highest return. It is the 'optimist's choice'.
Competitor Maximum
Decision Open Not Open Maximum of the row
Drive-up window ($6,000) $20,000 $20,000
Breakfast ...

Solution Summary

Decisions have been made for the given payoffs using Maximax, Maximin, Hurwicz, and Equal Likelihood criteria.

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