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A real estate investor in a medium-sized western city is considering three investments: an apartment building, a strip mall, and an office building. Returns from
A real estate investor in a medium-sized western city is considering three investments: an apartment building, a strip mall, and an office building. Returns from each investment alternative depend on future population growth. The investor has developed three growth scenarios showing the rev enue from each investment alternative along with their probabilities of occurrence. This information is shown in the following table: Population Growth Probability Apartment Mall Office Slow 0.20 $75,000 $15,000 $200,000 Average 0.30 10,000 30,000 50,000 High 0.50 150,000 75,000 100,000 For the given payoff matrix, what is the best decision and its associated payoff using each of the following? a. the maximax criterion b. the maximin criterion c. the minimax regret criterion d. the expected-value criterion
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