“The Winners” a chemical manufacturing company is planning to build an additional production plant for packing materials. “The Winners” has to decide whether to build a small, medium or large facility. The Operations Manager of “The Winners” has conducted a survey of food making companies and collected the following data about the expected payoffs for each alternative in every possible state of nature to know the demand of their packing material.
Alternatives Expected Demands Maxmin Maximax Laplace Minimax Regret
Low Moderate High
Small Facility 20 20 20 20 20 20 -10
Medium 18 23 25 18 25 22 -5
Large 9 12 30 9 30 17 -11
Hence since 20 million is the best, choose to build a Small Facility using the Maximin strategy
Hence since 30 million is the best, choose to build a Large Facility using the Maximax strategy
Hence since 22 million is the best, choose to build a Medium Facility using the Laplace strategy
Hence since -5 million is the best, choose to build a Medium Facility using the Minimax Regret strategy
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