Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that...
Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars.
| States of nature | |||
| S1 | S2 | S3 | |
| Alternative (strategy) 1 | 110 | 80 | 70 |
| Alternative (strategy) 2 | 60 | 120 | 50 |
Determine the best alternative (course of action) for the EKA manufacturing company using the maximin criterion.
Homework Answers
Min payoff of decision 1=70
Min payoff of decision 2=50
Maximin =Maximum of (minimum pay off of alternatives 1, 2)
=Max(70,50)
=70
| Alternative (strategy) 1 |
is the best alternative (course of action) for the EKA manufacturing company using the maximin criterion
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