Which alternative should APC choose under the maximax criter

Which alternative should APC choose under the maximax criterion?

Which option should APC choose under the maximin criterion?

Which option should APC choose under the LaPlace criterion?

APC industries has been experiencing significant growth and has been having difficulty meeting customer demands recently. They are considering three options to address this issue. They can move to a larger facility, add a second shift or use a subcontractor to assist in production. The annual payoff of each option depends on if the current market continues to expand hold s steady or declines. The expected payoff for each combination is show in the table below Which alternative should APC choose under the maximax criterion? Which option should APC choose under the maximin criterion? Which option should APC choose under the LaPlace criterion?

Solution

given

we have to choose alternative

A)Under maximax criterion

maximax payoff is 250000

move to larger facility option is chosen by APC under maximax criterion

B) under maximin criterion

maximin payoff is -10000

so

Subcontract option should be chosen by APC under maximin criterion

C) Under laplace criterion

maximum expected payoff is 95000

so

move to larger facility option should be chosen by APC under Laplace crieterion

OPTION	Expand	steady	decline
move to larger facility	250000	125000	-90000
add a second shift	175000	80000	-45000
subcotract	90000	15000	-10000