Election results can affect the payoff from certain types of investments. Suppose a brokerage firm is faced with the prospect of investing $20 million a few weeks before the national election. They feel that if the Conservatives are elected, certain types of investments will do quite well, but if the Liberals are elected, other types of investments will be more desirable. To complicate the situation, a win for the NDP is likely to cause investments to behave in a different manner. Following are the payoffs (in $ millions) for different investments under different political scenarios. Use the data to reach a conclusion about which decision alternative to select. Use both the maximax and the maximin criteria and compare the answers.

Transcribed Image Text:

Investment A B C D Election Winner Liberals $15 $25 $40 $25 Conservatives $60 $10 -$10 $20 NDP -$25 $30 $15 $5