I need to have an explanation for what the minimax regret decision is? Question:
ID: 3247313 • Letter: I
Question
I need to have an explanation for what the minimax regret decision is?
Question: Consider the following decision table, which Joe B... Consider the following decision table, which Joe Blackburn has developed for Vanderbilt Enterprises States of Nature Low $40 $85 $60 $65 $70 Medium High $60 $70 $70 $70 $80 Alternatives $60 $70 $75 $65 (1) What is the maximin decision? (2) What is the maximax decision? (3) What is the Laplace decision? (4) What is the minimax regret decision? (5) If the probability of the three states of natures are: P(Low) -0.4, P(Medium) - 0.2, P(High) 04, then which alternative has the highest EMV? (6) With the probabilities given in (5), calculate the EVPI
Consider the following decision table, which Joe Blackburn has developed for Vanderbilt Enterprises States of Nature Low $40 $85 $60 $65 $70 Medium High $60 $70 $70 $70 $80 Alternatives $60 $70 $75 $65 (1) What is the maximin decision? (2) What is the maximax decision? (3) What is the Laplace decision? (4) What is the minimax regret decision? (5) If the probability of the three states of natures are: P(Low) -0.4, P(Medium) - 0.2, P(High) 04, then which alternative has the highest EMV? (6) With the probabilities given in (5), calculate the EVPIExplanation / Answer
1) Maximin Decision:
Maximin = 65,
Decision: D and E
2)
Maximax = 100
Decision: A
3) Laplace Criteria:
For A: 1/3 * (40+100+60) = 66.667
For B: 1/3 * (85+60+70) = 71.667
For C: 1/3 * (60+70+70) = 66.667
For D: 1/3 * (65+75+70) = 70
For E: 1/3 * (70+65+80) = 71.6667
Decision: B and E
4)
Regret:
Max Regret = 60
Minimax Regret = 10
Decision : C and D
5) EMV:
On the basis of expected monetary value, the best choice is the B as this maximises his EMV.
6) EVwPI = 0.4*85 + 0.2*100 + 0.4*80 = 86
EVPI = EMwV - EVwoPI = 86 - 74 = 12
Maximin Criteria Low Medium High Minimum A 40 100 60 40 B 85 60 70 60 C 60 70 70 60 D 65 75 70 65 E 70 65 80 65