Decision Investment Motel Restaurant Theater Shortage -$7,500 $3,000 $5,000 States of Nature Gasoline Availablity Stable Supply $12,000 $7,000 $6,000 Surplus $23,000 $6,500 $4,000 Maximum Minimum $23,000 -$7,500 $7,000 $3,000 $6,000 $4,000 Maximax decision = Maximin decision = Regret Table Decision Investment Motel Restaurant Theater States of Nature Gasoline Availablity Shortage Stable Supply Surplus $12,500 $0 $0 $2,000 $5,000 $16,500 $0 $6,000 $19,000 Minimax regret = Hurwicz alpha = 1 - alpha = Motel Restaurant Theater 0.3 0.7 $1,650 $4,200 $4,600 Decision: Equal Likelihood Motel Restaurant Theater $9,167 $5,500 $5,000 Decision: Maximum $12,500 $16,500 $19,000 Summary a) maximax b) maximin c) minimax regret d) Hurwicz (alpha = 0.4) e) Equal Likelihood Decision Motel Theater Motel or Restaurant Theater Motel Decision Tables Data Profit Probability Sun Visors Umbrellas Rain Overcast Sunshine 0.35 0.25 0.4 -400 2100 -200 0 1500 -800 Opportunity Loss Table Rain Overcast Probability 0.35 0.25 Sun Visors 2500 200 Umbrellas 0 0 Sunshine 0.4 0 EV Sun Visor Umbrella EOL Sun Visor Umbrella 2300 Decision: Minimize your Expected Opportunity Loss Real estate Development Decision Tables Interest Rate Project Decline (0.45) Stable (0.35) Increase (0.2) EV Office park $0.40 $1.55 $3.50 Office park Office building 2.5 1.8 2.75 Office building Warehouse 1.7 1.45 1.5 Warehouse Mall 0.8 2.3 3.7 Mall Condominiums 3.2 1.5 0.5 Condominiums Opportunity Loss table Interest Rate Project Decline (0.45) Stable (0.35) Increase (0.2) Office park Office building Warehouse Mall Condominiums EVPI Decision Economic Conditions Recession Graphic design 150,000 Nursing 160,000 Real estate 125,000 Medical technology 135,000 Culinary technology 110,000 Computer information technology 130,000 Degree Program Average 175,000 180,000 165,000 180,000 145,000 150,000 Good 220,000 205,000 220,000 210,000 235,000 190,000 Robust 200,000 215,000 210,000 270,000 205,000 245,000 Maximum Minimum 220,000 150,000 215,000 160,000 220,000 125,000 270,000 135,000 235,000 245,000 110,000 130,000 MAX MIN Maximax decision = Maximin decision = Regret Table Economic Conditions Degree Program Graphic design Nursing Real estate Medical technology Culinary technology Computer information technology Recession 10,000 0 35,000 25,000 50,000 Average 5,000 0 15,000 0 35,000 Good 15,000 30,000 15,000 25,000 0 Robust 70,000 55,000 60,000 0 65,000 30,000 30,000 45,000 25,000 Decision: Decision: Maximax Maximin Equal Likelihood Graphic design Nursing Real estate Medical technology Culinary technology Computer information technology $186,250 $190,000 $180,000 $198,750 $173,750 $178,750 Decision: Hurwicz alpha = 1 - alpha = Graphic design Nursing Real estate Medical technology Culinary technology Computer information technology 0.4 0.6 $178,000 $182,000 $163,000 $189,000 $160,000 $176,000 Decision: 0 0 Summary a) maximax b) maximin c) equal likelihood d) Hurwicz (alpha = 0.5) Decision Real estate Nursing Real estate Real estate 0.7 Shortage 250000 Compact Cars 250000 0.3 Surplus 1 50000 1 50000 Problem #25 (reference) Dat a Profit Shortage Probability 0.7 Compact cars 250000 Full-sized cars -90000 Trucks 125000 Surplus 0.3 150000 650000 180000 Re sult s EMV 0.7 Shortage -9 0000 Full-sized cars -9 0000 1 0 0.3 Surplus Decision 650000 650000 0.7 Shortage 1 25000 Trucks 1 25000 0.3 Surplus 1 8 0000 1 7 0000 180000 ID Name Value 0 TreePlan 1 2 3 4 5 6 7 8 9 Prob 0 Pred 0 0 0 0 Kind 0D 0E 0E 0E 1T 1T 2T 2T 3T 3T NS S1 3 2 2 2 0 0 0 0 0 0 S2 1 4 6 8 0 0 0 0 0 0 S3 2 5 7 9 0 0 0 0 0 0 S4 3 0 0 0 0 0 0 0 0 0 S5 0 0 0 0 0 0 0 0 0 0 Row 0 0 0 0 0 0 0 0 0 0 Col 14 4 14 24 2 7 12 17 22 27 1 5 5 5 9 9 9 9 9 9 Mark TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE