In an exercise in the book Production/Operations Management, 5th ed. (1996),William ThmPark J. Stevenson considers a theme park whose lease is about to expire. The theme park’s management wishes to decide whether to renew its lease for another 10 years or relocate near the site of a new motel complex. The town planning board is debating whether to approve the motel complex. A consultant estimates the payoffs of the theme park’s alternatives under each state of nature as shown in the following payoff table:

a. What alternative should the theme park choose if it uses the maximax criterion? What is the resulting payoff of this choice?b. What alternative should the theme park choose if it uses the maximin criterion? What is the resulting payoff of this choice?

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Theme Park Options Renew lease Relocate Motel Approved $500,000 $5,000,000 Motel Rejected $4,000,000 $100,000