Given the following payoff matrix for investment projects A, B, C, determine the best investment project...
Given the following payoff matrix for investment projects A, B, C, determine the best investment project for the firm according to (a) the maximin criterion and (b) the minimax regret criterion.
State of Nature
Project Recession Normal Boom
A $50 $75 $85
B 40 80 100
C 30 70 70
a) Maximin Criterion
|
Project |
State of Nature |
Maximin |
||
|
Recession |
Normal |
Boom |
||
|
A |
||||
|
B |
||||
|
C |
||||
b) Minimax Regret Criterion
|
Project |
State of Nature |
Regret Matrix |
Maximum Regret |
||||
|
Recession |
Normal |
Boom |
Recession |
Normal |
Boom |
||
|
A |
|||||||
|
B |
|||||||
|
C |
|||||||
Homework Answers
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