Morley Properties is planning to build a condominium development on St Simons Island, Georgia The company is trying to decide between building a small, medium, or large development The payoffs received for each size of development will depend on the market demand for condominiums in the area, which could be low, medium, or high The payoff matrix for this decision problem is Market Demand Size of Development Low Medium High Small 400 400 400 Medium 200 500 500 Large 400 300 800 (Payoffs in $1000s) The owner of the company estimates a 20 chance that market demand will be low, a 35 chance that it will be medium, and a 45 chance that it will be high 1A) Explain the weakness of Morley's Maximax decision 1B) Explain the weakness of Morley's Maximin decision 1C) Explain the weakness of Morley's EMV decision 1D) Perform a decision tree for Morley's decision analysis showing maximax, maximin, and EMV (either send a pic of pencil copy or perform in EXCEL spreadsheet)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 04, 2024

Morley Properties is planning to build a condominium development on St. Simons Island, Georgia. The company is trying to decide between building a small, medium,

Morley Properties is planning to build a condominium development on St. Simons Island, Georgia. The company is trying to decide between building a small, medium, or large development. The payoffs received for each size of development will depend on the market demand for condominiums in the area, which could be low, medium, or high. The payoff matrix for this decision problem is:

Market Demand
Size of Development	Low	Medium	High
Small	400	400	400
Medium	200	500	500
Large	400	300	800
		(Payoffs in $1000s)

The owner of the company estimates a 20% chance that market demand will be low, a 35% chance that it will be medium, and a 45% chance that it will be high.

1A)Explain the weakness of Morley's Maximax decision

1B) Explain the weakness of Morley's Maximin decision

1C) Explain the weakness of Morley's EMV decision

1D) Perform a decision tree for Morley's decision analysis showing maximax, maximin, and EMV (either send a pic of pencil copy or perform in EXCEL spreadsheet)