16 A managers staff has compiled the information below which

16. A manager\'s staff has compiled the information below which pertains to four capacity alternatives under four states of nature. Values in the matrix are present value in thousands of dollars.

Solution

(A) Assuming a maximizing strategy, which alternative would be chosen?

Answer :- Maximum is A ( $50 is the largest value for any alternative).

(B) If maximum were used, which alternative would be chosen?

Answer :- Maximum is either B or C ( Both have the largest minimum values of $30 )

(C) If states of nature are equally likely and an expected value of criterion of maximization is uesd, which alternative would be chosen?

Answer :- A: $35 ; B: $33.75 ; C : $31.25 ; D: $27.50 Hence, choose A.