For the question #4 in Homework #1, we developed the following decision table fo

Question

For the question #4 in Homework #1, we developed the following decision table for Ken who is the owner of Oil Co. Answer the following questions based on this problem. Which equipment should be selected based on the minimax regret criterion? The probabilities for the market have been determined to be 60% for favorable market and 40% for unfavorable market. Which equipment should be selected to maximize the expected profit of the operation? What is the expected value of perfect information in this situation? Which equipment would minimize the expected opportunity loss?

Explanation / Answer

Excel formula:

Excel formula:

c)

e) Texan is having minimum loss.

(a) MiniMax (without probability; opportunistic; minimise the maximum loss) Alternatives Scenarios for alternatives Favourable Unfavourable Sub100 310000 -170000 Oiler 270000 -130000 Texan 80000 -20000 Regret table (if we invest on the alternative other than the best one, how much loss/regret we have to bear?) Alternatives Scenarios for alternatives Favourable Unfavourable Maximum regret Sub100 0 150000 150000 Oiler 40000 110000 110000 (minimum regret) Texan 230000 0 230000 Go for-> Oiler

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---