The lease of Theme Park, Inc., is about to expire. Management must decide whether to renew the lease for another 10 years or to relocate near the site of a proposed motel. The town planning board is currently debating the merits of granting approval to the motel. A consultant has estimated the net present value of Theme Park’s two alternatives under each state of nature as shown on the following page.

240 Supplement to Chapter Five Decision Theory What course of action would you recommend using?

a. Maximax

b. Maximin

c. Laplace

d. Minimax regret Options Motel Approved Motel Rejected Renew $ 500,000 $4,000,000 Relocate 5,000,000 100,000 LO.1