Strutledge (see Case Problem 1.3) is a small liberal arts college faced with rising costs and decreasing enrollments. It would like to increase revenues (including tuition, donations, and grants) by expanding its student base and building ties with businesses in the surrounding area.

In Problem 1.3

To do so, it is considering establishing a new graduate program—an MBA, a master’s in computer science, a master’s in information technology, a master’s in nursing (affiliated with a major hospital in a nearby urban area), or a master’s in healthcare administration. In addition to generating additional enrollments within a new program, administrators also believe that a new graduate program could increase exposure and visibility for the school and enhance its reputation, as a whole, which could also result in increased enrollments and revenue sources. The cost to establish and maintain each new program differs according to faculty salaries, facilities, and the support necessary to attract new students, which, in turn, affects revenues.
a. Maximax
b. Maximin
c. Equal likelihood
d. Hurwicz (α =.50)
e. If Strutledge administrators use the Hurwicz criterion to make their decision, explain what this might mean about their decision-making strategy.
f. Strutledge has estimated probabilities of occurrence for the different states of program success as shown in the following table. What is the best decision using expected value?

g. Based on these decision analysis results, what would you recommend that Strutledge College’s decision be?
h. What decision would you recommend to Strutledge? Explain yourreasons.

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Interest Rates Project Office building Parking lot Warehouse Shopping mall Condominiums Decine Stable Increase 0.5 1.5 1.7 07 3.2 1.7 1.9 1.4 2.4 1.5 4.5 2.4 1.0 3.6 0.6 Program Success Graduate Program MBA Computer Science 38 Information Moderate Very Unsuccessful Success Successful Successful 32 35 24 09 41 16 .05 Technology Nursing Health .25 -33 30 .12 41 14 Administration 08 34 47