A manager is deciding whether or not to build a small facility. Demand is uncertain and can be either at a high or low level. If the manager chooses a small facility and demand is low, the payoff is $300
If the manager chooses a small facility and demand is high, the payoff is $100. On the other hand, if the manager chooses a large facility and demand is low, the payoff is -$200, but if demand is high, the payoff is $800.
(a) What would be the best decision based on the maximax criterion?
(b) What would be the best decision based on the maximin criterion?
(c) What would be the best decision based on the minimax regret?
(a) large facility - highest overall payoff = $800
(b) small facility - highest minimum potential payoff = $100
(c) large facility - lowest maximum regret = $500
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