Q. A Company has different investment options for their food business in Dubai. The table below...

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Q. A Company has different investment options for their foodbusiness in Dubai. The table below shows conditional values for theinvestment in various options for the Company under differentstates of nature (demand conditions). All values are in USDollars.
Alternatives
State of Nature
High Demand
Low Demand
Option 1
7,000
-1,000
Option 2
12,000
4,000
Option 3
11,000
3,000
If the probabilities associated with the states of nature are0.75 for high demand and 0.25 for a low demand, determine:
the decision under the Maximax criteria.
the decision under Mximin Criteria
  the decision under Hurwaiz criteria
  the decision under Laplace criteria
  the decision that provides the greatest expectedmonetary value (EMV).
the expected value of perfect information (EVPI).

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3.8 Ratings (570 Votes)

Maximax maximin Hurwicz and Laplace are decision makingapproaches without considering probabilitiesa Maximax is taking the maximum of each scenario in thiscase demand 1 and demand 2 and then choosing See Answer

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Transcribed Image Text

Q. A Company has different investment options for their foodbusiness in Dubai. The table below shows conditional values for theinvestment in various options for the Company under differentstates of nature (demand conditions). All values are in USDollars.AlternativesState of NatureHigh DemandLow DemandOption 17,000-1,000Option 212,0004,000Option 311,0003,000If the probabilities associated with the states of nature are0.75 for high demand and 0.25 for a low demand, determine:the decision under the Maximax criteria.the decision under Mximin Criteria the decision under Hurwaiz criteria the decision under Laplace criteria the decision that provides the greatest expectedmonetary value (EMV).the expected value of perfect information (EVPI).

Alternatives	State of Nature
Alternatives	High Demand	Low Demand
Option 1	7,000	-1,000
Option 2	12,000	4,000
Option 3	11,000	3,000