Build-Rite Construction has received favorable publiaity from guest appearances

Question

Build-Rite Construction has received favorable publiaity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table: Demand for Home Improvements High $416,000 $368,000 $270,000 Low ($192,000 $194,000 Hire Subcontract Do nothing $97,000 $25,000 $210,000 $132,000 Which alternative is best, according to each of the following decision criteria? a. The best decision according to maximin criterion is alternative and the payoff for this decision is Enter your response as an integer) Enter your answer in the answer box and then click Check Answer remaining Clear Al Check Answer MacBook : FI F2 F3 FA FS

Explanation / Answer

The first step is to find the minimum payoff for each of the alternatives.

The minimum payoff for hire alternative = $192,000

The minimum payoff for subcontract alternative = $97,000

The minimum payoff for do nothing alternative = $25,000

The best decision according to the maximin criterion is to select the maximum payoff out of the minimum payoffs for each of the alternatives.

In this case, the maximum payoff is $192,000.

Hence the best decision according to the maximin criterion is to select alternative hire and the payoff for this decision is $192,000.

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.