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ECON 85 Operations Research ASSIGNMENT NO. 11 (Decision Analysis) 2. A manager of a shopping mall is considering three alternative expansion projects for his mall:

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ECON 85 Operations Research ASSIGNMENT NO. 11 (Decision Analysis) 2. A manager of a shopping mall is considering three alternative expansion projects for his mall: a small motel, a theater, or a restaurant. The construction costs are about the same, but the monthly profits can be affected by future economic conditions in the area. The following table shows the monthly net operating revenue that could result from each project. ECONOMY CONDITIONS Project Poor Fair Good Motel $7,000 $15,000 $18,000 Restaurant 5,000 10,000 20,000 Theater 10,000 11,000 13,000 Determine the best investment using the following decision criteria: a) Maximax bj Maximin c) Minimax Regret d) Hurwicz (a = 0.4) Index of optimism e) Equal likelihood 3. Microchip is planning a new facility and considering a location in the following countries. Depending on the economic conditions for the next 3 years, the following costs have been estimated ($US million). ECONOMIC CONDITIONS Country Decline Same Improve Korea 21.7 19.3 15.2 China 19.0 18.5 17.6 India 19.2 17.1 14.9 Philippines 22.5 16.8 13.8 Singapore 25.0 21.2 12.5 Which alternative would be selected if: a) The decision maker is an optimist (Minimin)? b) The decision maker is a pessimist (Minimax)? c) The decision maker has an index of optimism of 0.4? d) The decision maker wants to use the Minimax regret criterion

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