The maximin approach involves choosing the alternative with the highest or lowest payoff

Solved June 27, date for a new shipment of Totalee toothbrushes. Robert also believes that customers would become upset with the inconvenience of shopping at Nightingale and would perhaps begin looking for another store providing better service. He estimates the costs of dealing with disgruntled customers and The shop has two mechanics

The maximin approach involves choosing the alternative with the highest or lowest payoff

In this article we will discuss about Managerial Decision-Making Environment: Concept of Decision-Making Environment 2. Decision-Making Environment under Uncertainty 3.

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Concept of Decision-Making Environment: The distinction is drawn on the basis of the degree of knowledge or information possessed by the decision-maker.

But there is a difference between the two concepts. Risk can be characterized as a state in which the decision-maker has only imperfect knowledge and incomplete information but is still able to assign probability estimates to the possible outcomes of a decision. Risk is objective but uncertainty is subjective; risk can be measured or quantified but uncertainty cannot be.

Modern decision theory is based on this distinction. In general, two approaches are used to estimate the probabilities of decision outcomes. With the priori method, the decision-maker is able to derive probability estimates without carrying out any real world experiment or analysis.

For example, we know that if we toss an unbiased coin, one of two equally likely outcomes i. Uncertainty does not seem to suggest that the decision-maker does not have any knowledge. Some Characteristics of a Decision Problem: All business decision problems have certain common characteristics.

These not only constitute a formal description of the problem but also provide the structure necessary for a solution: Alternative courses of action strategies 3. Events or outcomes 4. The manufacturer of these has imposed a condition on you: You have to order in batches of But you cannot assign any probability estimate to the alternative levels of demand or sales.

It is not possible for you to wait for some time to study the nature or determine the level of demand, nor can you place more than one order. Thus, a situation of complete uncertainty prevails. The three alternative strategies are to order shirts A1A2 or A3.

The states of nature which are external to and beyond the control of the inventory manager are the events and in this case are three levels of demand: Since the inventory manager does not know which of the events will occur, he is forced to make his decision in the face of uncertain outcomes.Assume the following payoff table is available.

Historical data indicates that there is 30% chance that the lot is poor quality (s1), 50 % chance that the lot is fair quality (s2) and 20% chance that the lot is 5/5(3).

has the highest estimated payoff of $1,, in that column. and the maximin criteria. This approach requires the decision maker to specify a degree of optimism, in the form of a coefficient of optimism, a.

The maximin approach involves choosing the alternative with the highest or lowest payoff

the opportunity loss table and then choosing the alternative that had the lowest average. Thus, the row averages for the.

How to Make a Decision with Bayes Decision Rule

Choose the alternative with the least variation among its possible outcomes Risk-Averting approach Support the day-to-day operational and tactical decision-making needs of managers.

Selected Answer: False Correct Answer: False Question 5 2 out of 2 points Both maximin and minimin criteria are optimistic. Answer Selected Answer: False Correct Answer: False Question 6 2 out of 2 points The Hurwicz criterion is a compromise between the maximax and maximin criteria%(46).

) For each decision alternative, the maximum payoff is multiplied by aand the minimum payoff is multiplied by 1 - a. For our investment example, if a equals (i.e., the company is slightly optimistic) and 1 - a = , the following decision will result.

The maximin approach involves choosing the alternative with the highest or lowest payoff. Answer Selected Answer: False Correct Answer: False Documents Similar To Mat Strayer Quiz2 Week3. mat final 1. Uploaded by. SaideAnneChaar.