The construction of a hydroelectric plant in a wilderness valley is under consideration. It is known that the valley contains an insect species found nowhere else, and the project includes relocating the insects. It is not known whether they can be successfully located. The pay-off matrix is State of nature F A P +70 −20 Decision A +20 +20 where F and A stand for favourable and unfavourable, P is the decision to go ahead with the hydroelectric plant, A is the decision to proceed instead with a coal-fired plant, and the cell entries are NPV millions of £s.

Favourable is the state of nature where species relocation is successful, unfavourable is where it is not. Ascertain the decisions following from adopting:

(a) the principle of insufficient reason,

(b) the maximin rule and

(c) the maximax rule. Derive the regret matrix and ascertain the implications of the minimax regret rule, and compare the outcome with that arising from the safe minimum standard approach.