Question

The following is a payoff table giving profits for various situations.

	States of Nature
Alternatives	A	B	C
Alternative 1	110	150	120
Alternative 2	60	80	70
Alternative 3	200	100	250
Do Nothing	0	0	0

What decision would a pessimist make?

		Alternative 1
		Alternative 2
		Alternative 3
		Do Nothing

Answer 1

for Alternative 1: minimum payoff =110

for Alternative 2: minimum payoff =60

for Alternative 3: minimum payoff =100

for Alternative 4(do nothing): minimum payoff =0

from above maximum of minimum payoff in each Alternatives belong to Alternative 1

therefore pessimist should choose Alternative 1