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HW 6 solutions - Homework#6 Solutions 13.1.1 For maximum...

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Homework #6 Solutions 13.1.1. For maximum decision look at Pizza King Chooses Min Reward Small 2,000* Medium 1,000 Large 0 Thus, maximin decision is to mount a small advertising campaign. For maximax decision look at Pizza King Chooses Min Reward Small 6,000 Medium 6,000 Large 9,000* Thus, maximax decision is to mount a large advertising campaign. To find Minimax Regret decision compute regret matrix Small Medium Large Maximum Regret Small 3,000 1,000 0 3,000 Medium 4,000 0 1,000 4,000 Large 0 0 2,000 2,000* Thus, minimax regret decision is to choose a large advertising campaign. 13.1.2. The reward matrix (in hundreds of thousands of dollars) is as follows: 30,000 50,000 80,000 Build 6 - 8 = -2 10 - 8 = 2 16 - 8 = 8 Not Build 0 0 0 To find the maximin decision look at Minimum Reward Build -2 Don’t Build 0* Thus, maximin decision is Don’t Build . To find the maximax decision look at Maximum Reward Build 8* Don’t Build 0 Thus, maximax decision is to Build . The regret matrix is as follows: Noble Greek Pizza King Annual Demand
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