3325p11hs a decision making tools

Maximax find the alternative that maximizes the

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Unformatted text preview: n A – 10 Uncertainty 1. Maximax Find the alternative that maximizes the maximum outcome for every alternative Pick the outcome with the maximum number Highest possible gain This is viewed as an optimistic approach A – 11 Uncertainty 2. Maximin Find the alternative that maximizes the minimum outcome for every alternative Pick the outcome with the minimum number Least possible loss This is viewed as a pessimistic approach A – 12 Uncertainty 3. Equally likely Find the alternative with the highest average outcome Pick the outcome with the maximum number Assumes each state of nature is equally likely to occur A – 13 Uncertainty Example States of Nature Alternatives Favorable Market Unfavorable Market Construct large plant large $200,000 -$180,000 Construct small plant $100,000 $0 Do nothing Maximum in Row Minimum in Row Row Average $200,000 -$180,000 $10,000 -$20,000 $100,000 -$20,000 $40,000 $0 $0 $0 $0 Maximax Maximin Equally Equally likely likely 1. Maxi...
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