Background

An engineering company is planning ahead and have decided to undertake one of four strategies dependent on the economic outlook. The data in Table 1 gives the Net Present Values (NPV, million) estimated by the company for the four alternative strategies [P,Q,R,S] in relation to the economic outlooks.

Strategy		Economic outlook
	Good	Medium	Poor
P	30	25	-15
Q	15	15	15
R	35	30	-5
S	45	10	-5

Table 1: NPVs ( million)

Determine which strategy (and why) the company should select if they use the following criteria

1. Maximin
2. Laplace
3. Maximax
4. Hurwicz (with a = 0.6)
5. Minimax Regret

6. Plot a sensitivity analysis from the Table 1 data, and provide comment.
7. Describe what is a in the Hurwicz equation.
8. New information suggests the probabilities of Poor, Medium and Good economic outlooks are 0.2, 0.5 and 0.3 respectively. Given this - on the basis of Expected Monetary Value, what strategy (and why) should be considered as the best alternative?